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An Interview With Gary Shilling: Masters in Business (Audio) · Masters in Business

• 0:03
  Speaker 1: This is Masters in Business with Barry Ridholts on Bloomberg Radio.
• 0:08
  Speaker 1: So I have a funny story about my guest this week. UM,
• 0:11
  Speaker 1: you probably know who he is. His name is Gary Shilling.
• 0:14
  Speaker 1: He's an economist. He's all over television and and print
• 0:18
  Speaker 1: and everything. He's he's his background. He essentially built the
• 0:24
  Speaker 1: economics department at Merrill Lynch. He was Meryll's first chief economist. Um.
• 0:29
  Speaker 1: And we we get into a few stories about that,
• 0:31
  Speaker 1: but I have I have a really amusing story that
• 0:34
  Speaker 1: we just didn't get to um in our conversation. So
• 0:41
  Speaker 1: I have at various times spoken at different events and
• 0:44
  Speaker 1: and this was an event that was down in the Caribbean. Um.
• 0:49
  Speaker 1: And they have a lineup of different people, this economist,
• 0:53
  Speaker 1: that market strategist, and you sing for your supper. You
• 0:57
  Speaker 1: you speak for an hour or two and then you
• 0:59
  Speaker 1: get to play the Caribbean for a few days. So
• 1:01
  Speaker 1: it's a good deal for everybody. And by coincidence, I'm
• 1:05
  Speaker 1: on a catamaran with my wife and Gary Shilling and
• 1:10
  Speaker 1: Gary's wife, and uh we're going out to do a
• 1:13
  Speaker 1: little diving, a little snorkeling. UM. I want to say
• 1:17
  Speaker 1: it was Anguila or Antigua, and I never remember which
• 1:22
  Speaker 1: is which, but you know, at a certain point, all
• 1:24
  Speaker 1: those islands they're beautiful, that's sunny, the water is gorgeous,
• 1:27
  Speaker 1: and it's hard to tell where you are when you're
• 1:29
  Speaker 1: on a boat for a week or so. So we
• 1:32
  Speaker 1: go out to the dive location and it's a bright
• 1:34
  Speaker 1: sunny day and everything is marked underwater. It's twenty feet,
• 1:38
  Speaker 1: it's thirty feet. It's crystal clear waters. And I have
• 1:42
  Speaker 1: a tendency to to even win snorkeling, to like to
• 1:45
  Speaker 1: try and dive deep and and look at stuff. Um
• 1:48
  Speaker 1: and so all of a sudden storm comes in out
• 1:52
  Speaker 1: of nowhere. We come up from underwater and it's absolute
• 1:58
  Speaker 1: from bright blue size guys to totally gray. Can't see anything,
• 2:03
  Speaker 1: can't see more than ten ft. The boat, which was
• 2:07
  Speaker 1: fifty yards off in that direction, is gone. And I'm
• 2:11
  Speaker 1: a pretty good swimmer, and my wife is starting to panic.
• 2:14
  Speaker 1: What are we gonna do? We're stuck here, and I'm like, well,
• 2:17
  Speaker 1: we have two choices. It's the Carebbean. These storms blew
• 2:20
  Speaker 1: in and out in thirty seconds. We could just tread
• 2:22
  Speaker 1: water here and let it pass, or I'm pretty sure
• 2:25
  Speaker 1: the boat is that way. I have good sense. I
• 2:28
  Speaker 1: have a really good sense direction. And I said, um,
• 2:32
  Speaker 1: look see where the see where these markings are on
• 2:34
  Speaker 1: the floor, and where the entrance to this dive side
• 2:38
  Speaker 1: is straight line back that that's where the boat is.
• 2:41
  Speaker 1: So we could wait here for five minutes, wait for
• 2:43
  Speaker 1: this to pass. We could go back to the boat.
• 2:46
  Speaker 1: She goes, take us back to the boat. Okay, So
• 2:49
  Speaker 1: she grabs onto my waist ban and I swim back
• 2:52
  Speaker 1: to the boat um or at least where I think
• 2:55
  Speaker 1: the boat is, and we're swimming for about seven minutes
• 2:59
  Speaker 1: and lo and behold, oh look there's the outline of
• 3:01
  Speaker 1: a sail. Oh that's the cameraman. There's a boat. And
• 3:04
  Speaker 1: of course by the time we get to the camemar Ran,
• 3:07
  Speaker 1: the skies are clearing. But meanwhile I assumed it was
• 3:11
  Speaker 1: just myself and my wife swimming back to the boat.
• 3:14
  Speaker 1: We look back, there's a line of forty people following us,
• 3:17
  Speaker 1: including Gary Shilling and his wife. It was a little
• 3:21
  Speaker 1: nerve racking for people who either aren't good swimmers or
• 3:24
  Speaker 1: tends a panic a little bit. And so we all
• 3:27
  Speaker 1: get back on the camemar Ran and all of us
• 3:30
  Speaker 1: uh the cat then takes us to a cove with
• 3:32
  Speaker 1: the water is three ft deep, and we all get
• 3:35
  Speaker 1: ripped roaring lye drunk and spent a few hours stumbling
• 3:38
  Speaker 1: along the beach. So that was the first time I
• 3:41
  Speaker 1: spent any time with h Gary Shilling. We've since remained
• 3:44
  Speaker 1: friendly and UM, I've always enjoyed him and his wife.
• 3:48
  Speaker 1: They're they're fascinating, lovely people and every year he sends
• 3:52
  Speaker 1: a batch of honey uh to friends and family that
• 3:56
  Speaker 1: he raises himself. We spent a lot of time talking
• 3:59
  Speaker 1: about beak keeping, which is pretty hilarious conversation. Um, without
• 4:04
  Speaker 1: further ado, here is my chat with economist Gary Shilling.
• 4:12
  Speaker 1: This is Master's in Business with Barry Ridholds on Bloomberg Radio.
• 4:16
  Speaker 1: This week on Masters in Business on Bloomberg Radio, my
• 4:19
  Speaker 1: special guest is Gary Shilling, an economist and proprietor of
• 4:25
  Speaker 1: the a Gary Shilling Newsletter and Economic Forecast. A little
• 4:30
  Speaker 1: background about Gary got a degree in physics cum Laudy
• 4:33
  Speaker 1: Magnicum Loudy from Amherst College before getting a master's and
• 4:38
  Speaker 1: a pH d in economics at Stanford. Ended up on
• 4:43
  Speaker 1: the research staff of the Federal Reserve Bank of San Francisco,
• 4:47
  Speaker 1: before going on to set up the economics department at
• 4:51
  Speaker 1: a little shop called Merrill Lynch, where he served as
• 4:54
  Speaker 1: the firm's first chief economist. Wow, that's an amazing h
• 5:00
  Speaker 1: piece of history. Author of the book The Age of
• 5:03
  Speaker 1: the Leveraging twice ranked as Wall Street's top economist according
• 5:07
  Speaker 1: to Institutional Investor, and a legendary beekeeper, Gary, Welcome to Bloomberg.
• 5:13
  Speaker 1: Very glad to be with you. So Gary and I
• 5:16
  Speaker 1: know each other for quite a few years. We'll we'll
• 5:19
  Speaker 1: talk about some of our adventures together. But let's start
• 5:22
  Speaker 1: with the beginning. So physics, right, and I keep talking
• 5:27
  Speaker 1: to people on Wall Street with a physics background. How
• 5:30
  Speaker 1: do you go from physics? Would from that to both
• 5:35
  Speaker 1: a master's and a doctor in an economics at Stanford? Well,
• 5:39
  Speaker 1: I like the discipline of physical sciences, and uh, there
• 5:44
  Speaker 1: is a there is a yearning for closure own things.
• 5:49
  Speaker 1: You you want to fit things together. It isn't just
• 5:53
  Speaker 1: kind of a flash here, a flash there. You want
• 5:55
  Speaker 1: to see how things come out in terms of a
• 5:59
  Speaker 1: total and take some variables, put them into a formula.
• 6:02
  Speaker 1: And it's that's a little oversimplified, but but the whole
• 6:06
  Speaker 1: idea is that there is a there's a discipline to
• 6:11
  Speaker 1: any any uh natural science, physics, chemistry, math, all these things. Uh,
• 6:18
  Speaker 1: they don't have quite the fuzziness that economics has. Now
• 6:21
  Speaker 1: you get into economics, and you know, economic forecasting is
• 6:24
  Speaker 1: an art, it's not a science. But that discipline, I
• 6:28
  Speaker 1: think it's important because it kind of keeps you on
• 6:30
  Speaker 1: this straight and narrow But anyway, I started off there
• 6:34
  Speaker 1: and then my senior year I had an attack of
• 6:37
  Speaker 1: common sense and decided I wasn't cut out to be
• 6:39
  Speaker 1: a research physicist. So I had a similar epiphany in
• 6:42
  Speaker 1: my senior years, and so I decided to move on.
• 6:46
  Speaker 1: And uh, you know, it's one of these one of
• 6:49
  Speaker 1: these great developments where um, I was thinking about going
• 6:53
  Speaker 1: to graduate school in economics, and I talked to amateurs
• 6:56
  Speaker 1: as a small school about a thousand students at the time,
• 6:58
  Speaker 1: and talked to the president of the college, and he
• 7:01
  Speaker 1: suggested business school and a couple of other people, and
• 7:04
  Speaker 1: I talked to the head of the economics department. And
• 7:06
  Speaker 1: I had happened to have when I had an elementary
• 7:09
  Speaker 1: economics course and the sections were taught not by graduate
• 7:12
  Speaker 1: students because there were none, but by the faculty and
• 7:15
  Speaker 1: and uh we talked about it. He suggested a couple
• 7:18
  Speaker 1: of places and then he said, what's your academic record?
• 7:20
  Speaker 1: And I told him. He said, oh, you can get
• 7:22
  Speaker 1: anywhere you want to go. Where do you want to go?
• 7:24
  Speaker 1: And I said, well, I grew up in Ohio, I'm
• 7:26
  Speaker 1: here in Massachusetts. I've been an allergic sense birth. I'd
• 7:29
  Speaker 1: like to get into a decent climate. And he said, well,
• 7:32
  Speaker 1: how about Stanford? And I said the climate was fine,
• 7:34
  Speaker 1: how about the how about the economics department always one
• 7:36
  Speaker 1: of the top two or three in the country. So
• 7:38
  Speaker 1: he called up, set it up. I got a I
• 7:41
  Speaker 1: got a teaching assistant ship, a resident assistant ship. I
• 7:46
  Speaker 1: never filled out an application. It was one of these
• 7:48
  Speaker 1: things where somebody really did something for it for me.
• 7:51
  Speaker 1: We all have that going out and went out of
• 7:53
  Speaker 1: his way. And well, as I say, the rest of history,
• 7:55
  Speaker 1: that's fantastic. So from physics, from physics to Stanford, you
• 8:00
  Speaker 1: end up working in standard oil now ex on mobile correct?
• 8:04
  Speaker 1: How did that come about? And how did you go
• 8:06
  Speaker 1: from there to finance? Well it was interesting at that time. Uh,
• 8:11
  Speaker 1: when I came out of Stanford there, Uh, my wife
• 8:14
  Speaker 1: and I were would like to have stayed on the
• 8:16
  Speaker 1: West Coast. I met her. She was a physiology major
• 8:19
  Speaker 1: at Stanford and UH graduate school and uh, but there
• 8:25
  Speaker 1: are only three places of PhD economists could work in
• 8:27
  Speaker 1: the Bay Area. One was that the San Francisco Fed
• 8:31
  Speaker 1: and I spent a summer there and that was a
• 8:33
  Speaker 1: pretty laid back place. The second was Bank of America
• 8:37
  Speaker 1: when it was Bank of America California, UM the g
• 8:40
  Speaker 1: and Needy uh or origination and UH they sponsored my
• 8:46
  Speaker 1: my PhD research and that wasn't really quite active enough.
• 8:51
  Speaker 1: And the third one was Stanford Research Institute, and they
• 8:53
  Speaker 1: didn't pay anything. So I told my wife there are
• 8:56
  Speaker 1: two things I'd never never do. One is work in
• 8:58
  Speaker 1: New York, and he was kidding to work. Well, that
• 9:00
  Speaker 1: was the beginning of a great forecasting career, because I
• 9:03
  Speaker 1: took a job as an economist with Standard Alone New
• 9:06
  Speaker 1: Jersey now ax On Mobile. As you point out, Berry
• 9:09
  Speaker 1: and Uh, well the aggressive story as we lived in
• 9:12
  Speaker 1: a New York apartment for two years, moved to the suburbs,
• 9:15
  Speaker 1: commuter for twenty five years, but in nine nine I
• 9:18
  Speaker 1: moved our shop out to suburban New Jersey. And it's
• 9:21
  Speaker 1: a mere coincidence. It's one point four miles from our
• 9:23
  Speaker 1: house in Short Hills, New Jersey, just just by coincidence.
• 9:26
  Speaker 1: So let's talk a little bit about your time on
• 9:29
  Speaker 1: Wall Street. You not only were the first economist chief
• 9:33
  Speaker 1: economists from Merrill Lynch, you actually set up their entire economics. Yeah.
• 9:37
  Speaker 1: That that's an interesting story because at that point the
• 9:41
  Speaker 1: bond houses on Wall Street had economists. Henry Coffin was
• 9:45
  Speaker 1: at Solomon Brothers, al Osian Art first Boston, Lynn Santao
• 9:49
  Speaker 1: at Aubrey G. Lampson. Uh. But Merrill was known as
• 9:53
  Speaker 1: a But I was. I think I was the first
• 9:56
  Speaker 1: economist at a stock house Merrill Lynch, And at that
• 10:00
  Speaker 1: point economists were relatively new. I can remember Bill Freud,
• 10:05
  Speaker 1: who was the economist for New York Stock Exchange, remains
• 10:07
  Speaker 1: a good friend. Uh. And he would have what he
• 10:10
  Speaker 1: called point Freud's friends. All the economis from Wall Street
• 10:13
  Speaker 1: over for monthly lunches at the New York Stock Exchange,
• 10:17
  Speaker 1: and we all fit comfortably in one of those wonderful
• 10:19
  Speaker 1: ornate rooms. There couldn't have been more than twenty of us. Now,
• 10:22
  Speaker 1: how many dozens hundreds of economists are there in the
• 10:25
  Speaker 1: Wall Street makes a lot of sense. Perhaps it it
• 10:28
  Speaker 1: is part of the reason we obsessed so much on
• 10:32
  Speaker 1: the day to day economic data that seems to come out.
• 10:35
  Speaker 1: I recall less of an emphasis on that ten twenty
• 10:39
  Speaker 1: years ago then we see currently well, and of course
• 10:42
  Speaker 1: there's a difference to the data then. I mean, at
• 10:44
  Speaker 1: that point every economist would have a couple of researcher
• 10:47
  Speaker 1: assist since you get the data by mail, they laboriously
• 10:50
  Speaker 1: draw these charts. There were there were, you know, hardly
• 10:53
  Speaker 1: any computers. There was no there were no copy machines.
• 10:56
  Speaker 1: I mean, it was and of course that made you
• 10:59
  Speaker 1: think a lot more. You're listening to Masters in Business
• 11:01
  Speaker 1: on Bloomberg Radio. My guest this week is Gary Shilling,
• 11:05
  Speaker 1: an economist and essentially physicist who produces his own economic
• 11:10
  Speaker 1: research and forecasts. We were discussing earlier that you had
• 11:14
  Speaker 1: helped set up the research department of Merrill Lynch and
• 11:17
  Speaker 1: you were their chief economist. You also their first chief economists.
• 11:21
  Speaker 1: You also have the distinction of being the only person
• 11:24
  Speaker 1: to be fired not once, but twice by Donald Reagan
• 11:29
  Speaker 1: from Merrill Lynch. Tell us how that came about. I
• 11:33
  Speaker 1: went there in nineteen sixty seven and there had not
• 11:35
  Speaker 1: been a recession in the US really since nineteen sixty six. One.
• 11:41
  Speaker 1: Uh Now, I forecast recession for six seventy, which did occur.
• 11:46
  Speaker 1: But it was so different from Merrill Lynch because Mary
• 11:49
  Speaker 1: Lynch at that point it was by listed stocks only.
• 11:52
  Speaker 1: That was the whole rationale of the firm, and the
• 11:55
  Speaker 1: idea of a recession was very upsetting. So Don Reagan,
• 11:58
  Speaker 1: who was running the place and I had a difference
• 12:00
  Speaker 1: of opinion. Obviously he won. I took my entire staff left,
• 12:05
  Speaker 1: ended up at white Well, another Wall Street house with
• 12:08
  Speaker 1: no idea. In nineteen seventy eight, Mary Lynch would buy
• 12:10
  Speaker 1: why Well. So the story in the street, which is
• 12:12
  Speaker 1: literally true, was Chilling is the only guy fired twice
• 12:15
  Speaker 1: by Don Reagan. So we come back to you, come
• 12:17
  Speaker 1: back to Maryland, they buy white Well. Yea. And how
• 12:20
  Speaker 1: does the second firing come about? I mean, now, the
• 12:22
  Speaker 1: recessions that was automatic. As a matter of fact, I
• 12:25
  Speaker 1: found out later that that when when Reagan, the first
• 12:28
  Speaker 1: meeting between Don Reagan and Paul Hallingby was head of
• 12:31
  Speaker 1: white Well, that that Reagan said, Uh, if we get together,
• 12:35
  Speaker 1: I want I want to know that there's one employee
• 12:37
  Speaker 1: of white Weld who will not be invited to join
• 12:39
  Speaker 1: the combined firm. So I was out from I was
• 12:42
  Speaker 1: out before I got in. So anyway, that was the
• 12:44
  Speaker 1: inducement to do what I really had in mind, which
• 12:47
  Speaker 1: was set up my own firm, own firm. So before
• 12:49
  Speaker 1: we go to that, I want to talk about life
• 12:52
  Speaker 1: at a big shop in the late sixties or seventies.
• 12:55
  Speaker 1: What was it like as a chief economist at Merrill
• 12:58
  Speaker 1: Lynch back in the day. It was it was a
• 13:01
  Speaker 1: lot of fun in in in many ways they had
• 13:04
  Speaker 1: a very good UH sales staff, particularly the institutional salesman.
• 13:09
  Speaker 1: These guys were hungry for input. I was very willing
• 13:13
  Speaker 1: to travel all over the world, not only the US,
• 13:17
  Speaker 1: but Europe and Japan and UH. And it was it
• 13:20
  Speaker 1: was great working for these guys. Of course they were
• 13:23
  Speaker 1: they would they would really get their money's worth. I
• 13:26
  Speaker 1: remember one one salesman Minneapolis where this guy had scheduled
• 13:31
  Speaker 1: meetings with institutions every hour on the hour throughout the day.
• 13:35
  Speaker 1: I went to the lunch meeting, UM and I get
• 13:39
  Speaker 1: I get my fork ready for the first bite of lunch,
• 13:41
  Speaker 1: and he says, well, Gary, tell us about the economy,
• 13:44
  Speaker 1: and so the UH, the the entree, comes and goes,
• 13:47
  Speaker 1: that goes, comes and goes, and we rushed you out
• 13:50
  Speaker 1: there to the next one. And I say, wait a minute,
• 13:51
  Speaker 1: I didn't get anything. He said, don't worry. I got
• 13:53
  Speaker 1: a sandwich. You can eat it on the elevator on
• 13:55
  Speaker 1: the way down. So they kept you hopping as a
• 13:58
  Speaker 1: as an adjunct institutional sales. So you leave Merril almost
• 14:04
  Speaker 1: the second time and set up your own shop. You
• 14:07
  Speaker 1: have your own models and your own forecasting set up
• 14:10
  Speaker 1: that you put together. Let's let's talk a little bit
• 14:12
  Speaker 1: about the economy and economic indicators and what goes into
• 14:17
  Speaker 1: your process. What do you think of the most important
• 14:20
  Speaker 1: economic indicators, what do you follow and think has the
• 14:23
  Speaker 1: most resonance. Well, let me say this very just just
• 14:25
  Speaker 1: going into this that, as I mentioned earlier, forecasting in
• 14:29
  Speaker 1: my view as an artist not a science. Now, I
• 14:31
  Speaker 1: was trained as as econometrician. When I got to Stanford,
• 14:35
  Speaker 1: I had had you know, if you're a physics major,
• 14:37
  Speaker 1: you're a math major two whether you want to be
• 14:39
  Speaker 1: or not. And I was working there under kenn Arrow,
• 14:41
  Speaker 1: Nobel Prize winner econometrician, and and I'd had only one
• 14:46
  Speaker 1: undergraduate economics course. So the the math side, the econometric
• 14:50
  Speaker 1: side was easy. The economic stuff I had to learn.
• 14:53
  Speaker 1: But I have found less and less interest in these
• 14:56
  Speaker 1: big models. They simply do not work. They blow up,
• 15:00
  Speaker 1: They produced nonsensical. Are they too complex or the You know,
• 15:06
  Speaker 1: that's a very good question, and I don't think anybody
• 15:08
  Speaker 1: has really ever completely answered that. But but but they
• 15:12
  Speaker 1: But the problem is you have to keep going in
• 15:14
  Speaker 1: and plugging in and by the time you get all through,
• 15:17
  Speaker 1: you and do it from from from scratch. But at
• 15:22
  Speaker 1: that time there was this hope that somehow you could
• 15:25
  Speaker 1: devise a model of the economy. It would be unsolid
• 15:29
  Speaker 1: by human hands. You put in the inputs and outcomes
• 15:31
  Speaker 1: the solution and that's all you need to know. So now, forecasting,
• 15:36
  Speaker 1: in my view, it's a whole combination of things, and
• 15:40
  Speaker 1: it really can't be quantified in any precise way. It's
• 15:44
  Speaker 1: certainly looking at various leading indicators. What's the federals, the
• 15:50
  Speaker 1: Federal Reserve doing or not doing? Uh, what's the state
• 15:54
  Speaker 1: of consumers? Right now? We think we're in this age
• 15:57
  Speaker 1: of de leveraging, working off access debt from the eighties
• 16:00
  Speaker 1: and nineties, and that you know, I put out this
• 16:02
  Speaker 1: book The Age of the leveraging in and I said,
• 16:05
  Speaker 1: I thought we were going to have two percent real
• 16:06
  Speaker 1: GDP growth, And of course the FED and most people said,
• 16:09
  Speaker 1: oh no, it's gonna pick up. Well, where are we
• 16:11
  Speaker 1: two point two percent since this recovery started in the
• 16:14
  Speaker 1: middle of O nine. But it's it's looking at it's
• 16:16
  Speaker 1: looking at history. It's Kentucky winding. It's it's a whole
• 16:20
  Speaker 1: most of the Yeah, what is Kentucky wind. That's that's
• 16:24
  Speaker 1: that's a that's a Midwestern term for hunches. Okay, Kentucky wind.
• 16:29
  Speaker 1: I like that. Well, that's that's when you're shooting. You know,
• 16:32
  Speaker 1: those guys were really sharp. They were, so you have
• 16:35
  Speaker 1: to you have to know the wind because the wind
• 16:38
  Speaker 1: pushes the bullet a little bit. Oh yeah, I left.
• 16:40
  Speaker 1: In fact, I talked to a friend of mine who
• 16:42
  Speaker 1: was a trained as a sniper, and I called him
• 16:44
  Speaker 1: up after I've seen this movie The you know, the
• 16:46
  Speaker 1: American Sniper, and I asked him about that and he
• 16:49
  Speaker 1: explained that that shot the guy made when he took
• 16:51
  Speaker 1: out the bad guy, said that was impossible because the
• 16:54
  Speaker 1: sandstorms and with the with the winds going in and
• 16:58
  Speaker 1: out of the buildings, it would it would cause the
• 17:00
  Speaker 1: bullet to drift. And even even with all the power
• 17:03
  Speaker 1: of that fifty caliber, fifty caliber rifle is still going
• 17:07
  Speaker 1: to get I have a T shirt I have to
• 17:10
  Speaker 1: dig up somewhere. A buddy gave me, who was a
• 17:12
  Speaker 1: marine sharpshooter, their logo. Their their tagline was why run,
• 17:17
  Speaker 1: You'll only die tired. These guys are serious, serious shooters,
• 17:22
  Speaker 1: and they calculate all that stuff, everything from from curvature
• 17:26
  Speaker 1: of the earth to wind drift. It's all, it's all
• 17:28
  Speaker 1: part of it. So let's hold off discussing the economy
• 17:32
  Speaker 1: itself to a later segment. Let's talk a little bit
• 17:34
  Speaker 1: about what goes into some of the these models and
• 17:38
  Speaker 1: what goes into some of the forecasts. What do you
• 17:40
  Speaker 1: look at So you mentioned interest rates, you mentioned consumer spending.
• 17:44
  Speaker 1: What other factors do you think are really significant? Well,
• 17:47
  Speaker 1: what's what's also very import important is what is the
• 17:50
  Speaker 1: consensus saying. Because I in order to in order to
• 17:54
  Speaker 1: push back against or to see where they're wrong. Yeah,
• 17:57
  Speaker 1: I have two basic principles has always been Eid and me.
• 18:00
  Speaker 1: One is that is that human nature changes very slowly
• 18:05
  Speaker 1: over time. So people react to summer circumstances in Simmler
• 18:09
  Speaker 1: ways and others. History is relevant. Now you still have
• 18:11
  Speaker 1: to find the right piece of history. Mark Twain says
• 18:14
  Speaker 1: history doesn't repeat, but it rhymes. And the second one
• 18:17
  Speaker 1: is that you don't add value by rehashing the cansensus.
• 18:20
  Speaker 1: It doesn't mean you are contrarian, and then you bucket consensus. Regardless,
• 18:25
  Speaker 1: where we agree, we pass over lightly. But where we
• 18:28
  Speaker 1: find something that's important is h is likely to happen
• 18:31
  Speaker 1: because you're judged by your forecasting record, Elemanly. And third
• 18:35
  Speaker 1: is not yet within the purview of the consensus. That's
• 18:37
  Speaker 1: where we really get interested. This week on Masters in Business,
• 18:40
  Speaker 1: I'm speaking with economist Gary shilling uh noted author and
• 18:45
  Speaker 1: forecaster um and physicists for that matter, as well as
• 18:49
  Speaker 1: an economist. Right out of school, you spend some time
• 18:53
  Speaker 1: in the San Francisco Federal Reserve Office. What was that
• 18:56
  Speaker 1: experience like, Well, it was really at that point point
• 19:00
  Speaker 1: deciding that at least at that at that time, it
• 19:03
  Speaker 1: was a pretty sleepy operation. So I spent a lot
• 19:06
  Speaker 1: of time trying to figure out what indicators led the
• 19:09
  Speaker 1: stock market. Well, that was that was a that was
• 19:14
  Speaker 1: a stupid exercise because you know, you think about it.
• 19:17
  Speaker 1: The stock market tends to lead almost anything else. If
• 19:20
  Speaker 1: you could find something that consistently the stock market, hey
• 19:23
  Speaker 1: you'd make a fortune. So that was but that was
• 19:27
  Speaker 1: a learning experience. That's what happens when you're young and naive.
• 19:30
  Speaker 1: So let me ask you a related question. Then, what
• 19:34
  Speaker 1: what indicators do people tend to obsess about that really
• 19:37
  Speaker 1: don't matter all that Well, it changes over time, but
• 19:41
  Speaker 1: right now the FED is is pretty much irrelevant in
• 19:43
  Speaker 1: my view. I mean, you're looking at a period where
• 19:47
  Speaker 1: where the FED has has pushed out all this money
• 19:49
  Speaker 1: quantitative easing, it hasn't done much good. Why is that? Well,
• 19:53
  Speaker 1: it's very simple. Uh, Basically, that money got into circulation
• 19:58
  Speaker 1: and people use it to high assets stocks. But stocks
• 20:02
  Speaker 1: are owned principally by high income people who don't adjust.
• 20:05
  Speaker 1: They're spending much in relation to their assets. You've got
• 20:07
  Speaker 1: three cars in the driveway, You're not going to put
• 20:09
  Speaker 1: a fourth one in there. So it never got beyond that,
• 20:12
  Speaker 1: and it didn't do much to help the basic economy.
• 20:15
  Speaker 1: It's the pushing on a string, the change in liquidity trap.
• 20:18
  Speaker 1: You can use all the technical terms, but basically the
• 20:21
  Speaker 1: FED IS in my view is it is pretty much irrelevant.
• 20:24
  Speaker 1: And also, of course in this slow growth period um
• 20:27
  Speaker 1: the FED keeps pushing off the day that they're going
• 20:30
  Speaker 1: to raise rates. They're now a lot more concerned with
• 20:32
  Speaker 1: the rest of the world. Their charter is is strictly domestic,
• 20:35
  Speaker 1: full employment and price stability, but they obviously now are
• 20:39
  Speaker 1: expanding that because the rest of the world is it
• 20:42
  Speaker 1: is a global economy. But I think all in all,
• 20:44
  Speaker 1: the fet is is pretty impetent right now. It doesn't
• 20:46
  Speaker 1: make much difference what they do. So what has been
• 20:49
  Speaker 1: the impact of zero interest rate policy? What's been the
• 20:51
  Speaker 1: impact of of QI on the overall economy? The effect
• 20:56
  Speaker 1: of QUI on the overall economy has been surprisingly little.
• 20:59
  Speaker 1: It has pushed up asset prices, but you haven't gotten
• 21:02
  Speaker 1: the modiplier effect. Normally, when the FED gives the banks
• 21:06
  Speaker 1: a dollar in reserves by lending and re lending and
• 21:08
  Speaker 1: what's called a fractional reserve system, they turn it into
• 21:11
  Speaker 1: seventy dollars of M two money seventy this point now
• 21:18
  Speaker 1: it's one point four to one, so barely moving, barely moving.
• 21:22
  Speaker 1: Uh And so it really hasn't hasn't had much, hasn't
• 21:25
  Speaker 1: had much effect. Uh So so the FED, the FED
• 21:28
  Speaker 1: is really really I think of pretty much on the sidelines.
• 21:32
  Speaker 1: And and the other thing about the quantitative easing is
• 21:35
  Speaker 1: that the effects of this lower interest rates is created
• 21:39
  Speaker 1: a lot of distortions, a lot of zeal for yield.
• 21:42
  Speaker 1: You see the rush into leveraged loans, into emerging market
• 21:46
  Speaker 1: debt and equity, into UH, into commodities and hedge funds
• 21:51
  Speaker 1: and so on. Pension funds is still UH still cling
• 21:54
  Speaker 1: to the idea of eight percent returns on their portfolios.
• 21:56
  Speaker 1: They say, we can't get that in conventional stocks and bonds.
• 22:00
  Speaker 1: We're gonna get it some way. So they move out
• 22:01
  Speaker 1: on the risk curve, and I think a lot of
• 22:03
  Speaker 1: them moved a lot further out on the risker than
• 22:05
  Speaker 1: they realized. I still don't understand where this a percent
• 22:07
  Speaker 1: number has come from. It seems like they've made that
• 22:10
  Speaker 1: number up and that they had to. They want a
• 22:13
  Speaker 1: percent look in order to maintain a tax to for
• 22:16
  Speaker 1: its status. It's five percent is what you have to
• 22:19
  Speaker 1: put out. So I don't know where this number. Two.
• 22:21
  Speaker 1: I think maybe very was five percent plus three percent
• 22:24
  Speaker 1: per inflation. But but but you don't have inflation, like
• 22:27
  Speaker 1: you know, you haven't got any inflation. But of course
• 22:29
  Speaker 1: the other thing is if they start lowering that number,
• 22:32
  Speaker 1: then they have to lower the other side the discounting
• 22:34
  Speaker 1: rate for the future liabilities, the punch and payments to
• 22:38
  Speaker 1: bring it back to the to the present value, and
• 22:41
  Speaker 1: that greatly increases, you know, the lower the interest rate
• 22:43
  Speaker 1: you're discounting with, that greatly expands there the current value
• 22:47
  Speaker 1: of those liabilities. So they get hit on both sides.
• 22:51
  Speaker 1: So there's a great reluctance to to face the reality,
• 22:54
  Speaker 1: to be honest about what they should really be expecting. Correct,
• 22:58
  Speaker 1: that's correct, that that's quite fat sinating. So let's talk
• 23:01
  Speaker 1: a little bit about what should have been done following
• 23:03
  Speaker 1: the financial crisis. What should Congress have done? What should
• 23:07
  Speaker 1: the fiddle reserve have done in response to you know,
• 23:11
  Speaker 1: the collapse and asset prices and and GDP and jobs. Well,
• 23:16
  Speaker 1: bailing out Wall Street probably wasn't necessary, because we very
• 23:20
  Speaker 1: well could have had a full blown financial melch. What
• 23:23
  Speaker 1: about bailing out the bond holders? When we when we
• 23:26
  Speaker 1: talk about these bailouts, a lot of bad bonds were
• 23:29
  Speaker 1: paid out right, and I think that that really has
• 23:32
  Speaker 1: prolonged the agony. I think they probably went too far
• 23:35
  Speaker 1: on this whole and they and they really have way
• 23:40
  Speaker 1: overrated themselves in terms of what they can do. Listen,
• 23:42
  Speaker 1: look at the look at the whole affection threeon dollar damage.
• 23:45
  Speaker 1: It's huge quantitative easing, and what do we get? Two
• 23:48
  Speaker 1: percent real GDP growth? I mean, it's telling you that
• 23:51
  Speaker 1: these forces of the leveraging are so great they're overpowering this.
• 23:54
  Speaker 1: And these guys who constantly think that policy is gonna
• 23:57
  Speaker 1: is gonna overwhelm everything else and they're gonna get the
• 24:00
  Speaker 1: results they want. I think they're in a dream world.
• 24:02
  Speaker 1: You're listening to Masters in Business on Bloomberg Radio. My
• 24:06
  Speaker 1: guest today is Dr Gary Shilling. He is an economist, researcher, forecaster.
• 24:12
  Speaker 1: Let's talk a little bit about the present economy. Where
• 24:17
  Speaker 1: are we in the economic cycle. I'm not sure we're
• 24:21
  Speaker 1: in a conventional economic cycle, and of course everybody wishes
• 24:24
  Speaker 1: wishes we were. Everybody yearns for the idea of of
• 24:27
  Speaker 1: a very systematic cycle. And you can see where are you.
• 24:30
  Speaker 1: I go out and I see presentations. A lot of
• 24:32
  Speaker 1: the big banks have their representatives out and they say, oh,
• 24:34
  Speaker 1: here's a circle, and here's where we are in that. Uh.
• 24:38
  Speaker 1: I don't think we're in that kind of I don't
• 24:39
  Speaker 1: think we're in that kind of world right now. We're
• 24:41
  Speaker 1: going through this massive deleveraging or we're seeing slow growth,
• 24:45
  Speaker 1: we're seeing commadi prices decline, We're seeing the strengthen the dollar. Uh,
• 24:50
  Speaker 1: we're seeing competitive evaluations against the dollar. Uh. There's a
• 24:53
  Speaker 1: lot of things going on here that I don't think
• 24:55
  Speaker 1: give you a very clear idea of a cycle per se.
• 24:59
  Speaker 1: And one thing I think it is, you know, there's
• 25:01
  Speaker 1: this yearning for nostalgia. We all have that and and
• 25:04
  Speaker 1: forecashers are just as subject to this as anybody else.
• 25:07
  Speaker 1: And you always have this feeling, oh boy, if we
• 25:09
  Speaker 1: could get back to the days when it was a
• 25:11
  Speaker 1: nice cycle and I know that it's four years and
• 25:13
  Speaker 1: if pounds, I'd be thrilled to death. Yeah. But you know,
• 25:17
  Speaker 1: and equal and people talk about equal, and hey, I've
• 25:20
  Speaker 1: been in this business a long time, very and equal.
• 25:22
  Speaker 1: Everything was something you simply pass through on the way
• 25:25
  Speaker 1: to going to access is on the top of the bottom.
• 25:28
  Speaker 1: Don't value you exist at very briefly swing and in retrospect,
• 25:33
  Speaker 1: that's right. So along those lines, let me ask you
• 25:37
  Speaker 1: a um, let me ask you a related question. I
• 25:40
  Speaker 1: know your historian, I know you look at a lot
• 25:41
  Speaker 1: of economic data from days gone by. Is there any
• 25:45
  Speaker 1: period in history that's comparable to what we're living through now? Um,
• 25:52
  Speaker 1: that's a good question at times when you're working off access.
• 25:56
  Speaker 1: Is I suppose you could say that to a certain
• 25:58
  Speaker 1: extent outs what was going on in the in the
• 26:01
  Speaker 1: nineteen thirties, but both Great Depression or even yeah, that
• 26:07
  Speaker 1: was a great depression in the aftermath, but there were
• 26:08
  Speaker 1: a lot of other things going on. There, a complete
• 26:10
  Speaker 1: shifting in policy from basically a lessay fair to too
• 26:14
  Speaker 1: much more government involvement in the economy. Whether that helped
• 26:18
  Speaker 1: or hurt. You know, historians argue about that. I don't
• 26:22
  Speaker 1: think there is a I don't think there is a
• 26:23
  Speaker 1: period right now where you can you can point to
• 26:26
  Speaker 1: it and say, let's follow the script that does that
• 26:28
  Speaker 1: does happen from time to time. And I'm always looking
• 26:31
  Speaker 1: for those periods because but this is unique. You're saying,
• 26:34
  Speaker 1: I don't see I don't see the relevance of that
• 26:36
  Speaker 1: right now. Can you say this is unprecedented? There's nothing well,
• 26:39
  Speaker 1: at least, and I think in in the experience of
• 26:42
  Speaker 1: modern economic forecasting, it is so um, I know you're
• 26:47
  Speaker 1: a big bond bull and have been for a long time.
• 26:51
  Speaker 1: Four years thirty four year bullmarket in bonds showing no
• 26:56
  Speaker 1: sign of ending. Where are we in this bond? Is
• 27:00
  Speaker 1: the bond bull market still alive? Ye? The yield on
• 27:04
  Speaker 1: the third year treasure was fifteen point to one percent.
• 27:07
  Speaker 1: And I said in writing, we're entering the bond rally
• 27:10
  Speaker 1: of a lifetime because I saw inflation unwinding and with
• 27:14
  Speaker 1: lower inflation that would push down yields, push up bound prices.
• 27:18
  Speaker 1: And and I think we're still in that. I mean
• 27:20
  Speaker 1: yields now obviously have dropped a tremendous, tremendous amount there
• 27:24
  Speaker 1: more like three little over under three percent for the
• 27:27
  Speaker 1: third year bond. I think we're gonna go to two
• 27:29
  Speaker 1: percent now, somebody in the year on the three year bond.
• 27:32
  Speaker 1: Now somebody says, well, I mean, what's you know, what
• 27:35
  Speaker 1: does that do for you? And who would accept three
• 27:37
  Speaker 1: percent yield? I couldn't care less what the yield is.
• 27:40
  Speaker 1: I never have as long as it's going down, because
• 27:43
  Speaker 1: that means the price of the bonds is going on.
• 27:45
  Speaker 1: And when you look at the convexity of this whole thing,
• 27:48
  Speaker 1: if if I'm right. And you go from essentially three
• 27:51
  Speaker 1: percent to two percent on a thirty year uh coupon bond,
• 27:54
  Speaker 1: You make thirty percent on your money, which I think
• 27:56
  Speaker 1: is going to be a lot better than than whatever
• 27:58
  Speaker 1: is in second place, And my mortgage is going to
• 28:00
  Speaker 1: drop to two point nine percent. What does that do
• 28:04
  Speaker 1: for housing? What does that do for other items purchased
• 28:08
  Speaker 1: with debt? Well, of course, the question is under what
• 28:11
  Speaker 1: circumstance does that happen? If you're in a very low
• 28:13
  Speaker 1: inflationary environment, if you're in a slow growth growth, Yeah,
• 28:17
  Speaker 1: if you're in a slow growth environment, and it has
• 28:19
  Speaker 1: other characteristics. I mean, you look at housing. You mentioned housing. Housing,
• 28:23
  Speaker 1: This recovery has been basically a rental market. It has
• 28:26
  Speaker 1: not been new homeowners that normally are the basis of housing.
• 28:29
  Speaker 1: They're the people by the starter houses from people that
• 28:32
  Speaker 1: then move up the Latin X, run on the ladder
• 28:34
  Speaker 1: and on up and in housing not really happening because
• 28:37
  Speaker 1: people they don't have the incomes. Uh, they don't have
• 28:40
  Speaker 1: the credit scores. Uh they and and of course it's
• 28:43
  Speaker 1: become you know, it's it's become a virtue as as
• 28:47
  Speaker 1: out of necessity people. Oh, I really don't want to
• 28:49
  Speaker 1: house on my own. I don't want to responsibility. I'd
• 28:51
  Speaker 1: rather live in a more urban environment. Chicken and egg there,
• 28:55
  Speaker 1: Uh you know which way is a causality. But my
• 28:58
  Speaker 1: friend Jonathan Miller, who's been the show right well does
• 29:02
  Speaker 1: does a lot of interesting appraisal analysis, said that there
• 29:05
  Speaker 1: are so many people with either low equity, no equity,
• 29:09
  Speaker 1: or negative equity that a huge pool of inventory that's
• 29:14
  Speaker 1: normally for sale isn't on the market, and a huge
• 29:16
  Speaker 1: pool of potential buyers aren't participating, so you have few
• 29:21
  Speaker 1: buyers and even fewer houses. Yeah, and there are a
• 29:23
  Speaker 1: lot of people. You know, it's just like stocks, the
• 29:25
  Speaker 1: idea they take a beating in a stock and they say,
• 29:27
  Speaker 1: I won't sell it till I get out. Even it's
• 29:28
  Speaker 1: irrational because the market is whatever the market is today.
• 29:31
  Speaker 1: But I think there is that there is that pool
• 29:34
  Speaker 1: of of people who owned houses they bought them there underwater,
• 29:38
  Speaker 1: and they're basically saying, yeah, I want to shell, but
• 29:40
  Speaker 1: I can't get out from under it. And of course
• 29:42
  Speaker 1: some people they have you know, they they they're upside down.
• 29:45
  Speaker 1: They mortgages worth more than the house. So uh, if
• 29:49
  Speaker 1: they sell it, they've got they've got financial problems, to
• 29:52
  Speaker 1: say the least. It also depends if you're in a
• 29:54
  Speaker 1: recourse or a nonrecourse state, if you can walk away
• 29:57
  Speaker 1: or not, or if you can talk your bank into
• 30:00
  Speaker 1: renegotiating the total UH amounts under a number of the
• 30:04
  Speaker 1: hamp and tamp program, if you could do a short
• 30:07
  Speaker 1: sale where you basically sell the market and the lender
• 30:10
  Speaker 1: forgives a difference. I mean, they're all kinds of variations.
• 30:12
  Speaker 1: So what do you see happening in housing over the
• 30:14
  Speaker 1: next couple of years. Well, I think I think housing
• 30:17
  Speaker 1: is is probably going to limp along here, but I
• 30:20
  Speaker 1: don't see anything really pushing it. I mean, I mean,
• 30:23
  Speaker 1: we're the we're the most over housed country in the
• 30:25
  Speaker 1: world possible exception maybe Spain. I mean, the National Association
• 30:29
  Speaker 1: relators would never tell you that. But well, it's always
• 30:32
  Speaker 1: a good time to buy or sell a house according
• 30:34
  Speaker 1: to that. Yeah, I remember an ad they had, But
• 30:37
  Speaker 1: that's a great time to buy, it's a great time
• 30:39
  Speaker 1: to sell that. It's always a great always a great
• 30:42
  Speaker 1: time to generate a sales commission. All right, yes, you
• 30:45
  Speaker 1: got it, um, So let's talk about energy, because you've
• 30:47
  Speaker 1: sent some really interesting things about energy. Oil prices of
• 30:51
  Speaker 1: drop cut in half over the past year. I understand
• 30:55
  Speaker 1: you talked about twenty dollar a barrel oil. Yeah. Well,
• 30:58
  Speaker 1: here's the rationale, uh peck, is their cartel. Cartels exists
• 31:02
  Speaker 1: to keep prices above equilibrium. That's the whole purpose that
• 31:05
  Speaker 1: encourages cheating. Somebody was more than their share, either in
• 31:10
  Speaker 1: the cartel OPEC or outside Russia, American frackers, whoever. So
• 31:16
  Speaker 1: the leader of the cartel's responsibilities to cut its own
• 31:18
  Speaker 1: production to accommodate the cheaters to avoid a price collapse. Well,
• 31:23
  Speaker 1: OPEC has been doing that for years, but they're getting
• 31:26
  Speaker 1: tired of it. In the last ten years, OPEC production
• 31:28
  Speaker 1: has been flat and all the growth has come in
• 31:30
  Speaker 1: non OPEC sources, a lot of recently from American from
• 31:34
  Speaker 1: American frackers. So the Saudias and their and their colleagues
• 31:38
  Speaker 1: and the Persian Gulf. Back November seven, when we were
• 31:41
  Speaker 1: sitting down to our Thanksgiving turkeys, they decided they weren't
• 31:45
  Speaker 1: gonna cut They basically said, we're gonna play it. We're
• 31:47
  Speaker 1: gonna play in the labory game of chicken. We got
• 31:49
  Speaker 1: about five billion dollars in foreign currency reserves and work
• 31:52
  Speaker 1: and see, we're gonna see who can take lower prices.
• 31:55
  Speaker 1: The longest OPEC production and with thirty thirty million barrels
• 31:59
  Speaker 1: a day, they took off, basically took off the quotas.
• 32:01
  Speaker 1: It's now thirty one and a half million barrels a day.
• 32:04
  Speaker 1: She say, okay, now, how low the prices go before
• 32:06
  Speaker 1: somebody chickens out, some major producer says, I've had it,
• 32:10
  Speaker 1: I've got to cut back. It isn't the cost of
• 32:12
  Speaker 1: meeting budgets that's irrelevant here, Okay, maybe it maybe Venezuela
• 32:17
  Speaker 1: is fifty bucks of barrel, that's irrelevant. It isn't even
• 32:20
  Speaker 1: the full full cycle cost, in other words, the costs
• 32:22
  Speaker 1: of drilling the whole laying the pipes, the overhead. So no, no, no, no.
• 32:25
  Speaker 1: When you're a price war, it's the marginal cost. It's
• 32:28
  Speaker 1: the cost once the pipes are laid, the oil is
• 32:32
  Speaker 1: coming out of the ground. In other words, where is
• 32:34
  Speaker 1: your free cash flow disappear? And in the premium basis
• 32:38
  Speaker 1: in Texas and in the Persian Gulf, that's in the
• 32:40
  Speaker 1: ten to twenty dollar barrel range. So that's how I
• 32:43
  Speaker 1: get to that number. So you can actually see oil
• 32:46
  Speaker 1: full down to twenty five or so dollars a barrel,
• 32:49
  Speaker 1: and they're still making five or more dollars. That's right.
• 32:53
  Speaker 1: In other words, they may be losing money on a
• 32:55
  Speaker 1: full on the full cost basis, but in terms of
• 32:59
  Speaker 1: the marginal cash in other words, you know, they still
• 33:01
  Speaker 1: have positive cash flow on a marginal basis, so that
• 33:05
  Speaker 1: that's the incentive to keep producing. And now you know
• 33:08
  Speaker 1: price goes down, there doesn't stay there forever, but you
• 33:10
  Speaker 1: but you're kind to get to the point that you
• 33:12
  Speaker 1: have major production that disappears from the system, and we
• 33:15
  Speaker 1: haven't seen that. There's still the world a washing oil. Sure,
• 33:18
  Speaker 1: oh sure, I mean you know, you're producing about two
• 33:21
  Speaker 1: million barrels a day more than demand. Right now, you're
• 33:24
  Speaker 1: showing floating around filled with oil and no place to
• 33:27
  Speaker 1: drop it off. That's that's quite fascinating. So normally when
• 33:31
  Speaker 1: you talk about oil prices dropping from over a hundred
• 33:34
  Speaker 1: dollars to dollars, we would be talking about a recession.
• 33:40
  Speaker 1: Do you see your recession anytime in the next twelve months.
• 33:43
  Speaker 1: I don't see the making of a recession. Uh. You
• 33:46
  Speaker 1: have recession, said, at least historically for two reasons. One
• 33:49
  Speaker 1: is the FED raisers interest rates to choke off what
• 33:51
  Speaker 1: they see is an overheating economy. Now, they may have
• 33:54
  Speaker 1: painted themselves into a corner here. They've been yelling and
• 33:57
  Speaker 1: screaming about raising rates. They've cry wolf an awful lot
• 34:01
  Speaker 1: their credibilities at sake. They may raise rage simply to
• 34:03
  Speaker 1: preserve credibility. But the kind of interest rate like they
• 34:07
  Speaker 1: did in ninety four, where the where they want three
• 34:09
  Speaker 1: inter basis points on on FED funds in six months
• 34:12
  Speaker 1: or so, I don't see that. So the other possibility
• 34:15
  Speaker 1: recession is a is some kind of a shock. That's
• 34:18
  Speaker 1: what we had with the collapse in dot com stocks
• 34:21
  Speaker 1: in the late nineties. That was a housing uh in
• 34:23
  Speaker 1: in the in the mid two thousands, maybe China. So
• 34:27
  Speaker 1: in the last minute we have you you reading my mind.
• 34:30
  Speaker 1: What's the potential impact of China on the global economy. Well,
• 34:34
  Speaker 1: the reality of China is that it's nothing has really
• 34:37
  Speaker 1: changed their accept perceptions. China basically is not a leader.
• 34:41
  Speaker 1: It's not a self lead comp country. China imports raw
• 34:46
  Speaker 1: materials and equipment and use it to manufacture goods that
• 34:49
  Speaker 1: they send to North America and Europe. So their activity follows.
• 34:54
  Speaker 1: That's where they are depending on that. Of course they
• 34:56
  Speaker 1: have infrastructure spending as well. But but the point is
• 34:59
  Speaker 1: that it's the perception of China. With a collaption in
• 35:03
  Speaker 1: stock prices and the devaluation, people are suddenly saying, oh
• 35:06
  Speaker 1: my god, China isn't really independently growing. They haven't been
• 35:09
  Speaker 1: for years. But perceptions have reality, and we'll then have
• 35:12
  Speaker 1: enough follow on consequences with effects on commodity prices and
• 35:16
  Speaker 1: currencies and other developing countries. That's that's that's what's there,
• 35:20
  Speaker 1: and that's if there's a recession out there in the
• 35:22
  Speaker 1: next twelve months or so, I think that's probably where
• 35:23
  Speaker 1: it would would be generated. Thank you to my guest
• 35:26
  Speaker 1: Gary Shilling for spending so much time with us. Be
• 35:29
  Speaker 1: sure and check out our podcast extras where we continue
• 35:32
  Speaker 1: the conversation. Check out my daily column on Bloomberg View
• 35:36
  Speaker 1: dot com. Follow me on Twitter at Riholts. I'm Barry Ridhults.
• 35:40
  Speaker 1: You're listening to Masters in Business on Bloomberg Radio. Okay,
• 35:44
  Speaker 1: so this is the podcast portion of the show where
• 35:47
  Speaker 1: I stopped worrying about the time segments and we could
• 35:49
  Speaker 1: chat about anything before and I know I have to
• 35:53
  Speaker 1: get you out of here at a certain time, but
• 35:54
  Speaker 1: that'll be easy. Before we started ask talking about some
• 35:57
  Speaker 1: other the questions that we've missed and some other stuff.
• 36:01
  Speaker 1: These are all my questions. I have to ask you
• 36:05
  Speaker 1: about the bee keeping. You're you're famous on Wall Street
• 36:09
  Speaker 1: for for being a beekeeper and mailing out honey to
• 36:14
  Speaker 1: various people as as holiday presents. Yea, including myself. I
• 36:18
  Speaker 1: have I have a tub of honey, and I believe
• 36:23
  Speaker 1: and you have a different inscription every year, and the
• 36:25
  Speaker 1: one that stands out was the FEDS funny money can't
• 36:29
  Speaker 1: buy this honey. Yeah, this year as treasury bonds saw
• 36:32
  Speaker 1: our bees make more. There you go. We always try
• 36:36
  Speaker 1: to find something topical and usually related to the financial factor.
• 36:39
  Speaker 1: How on earth did you get into beekeeping? Well, it's
• 36:42
  Speaker 1: an interesting story I've got. We live in suburban New
• 36:46
  Speaker 1: Jersey and I have a bunch of drawer fruit trees
• 36:48
  Speaker 1: around our premises, and I didn't think they were getting
• 36:51
  Speaker 1: pollinated properly. Uh. And I had this based on what
• 36:54
  Speaker 1: what makes you wake up one day and say, I'm
• 36:56
  Speaker 1: not sure our fruit trees A bunch of blossoms are
• 36:58
  Speaker 1: not that much a lot of fruit? Okay, that makes sense?
• 37:02
  Speaker 1: Very simple road tests Anyway, I had this romantic idea
• 37:05
  Speaker 1: of putting in some bee hives, and my wife kept saying,
• 37:08
  Speaker 1: come on, this is this is this is no far
• 37:10
  Speaker 1: Mrs Suburbia. Well, then our third son, who was an
• 37:13
  Speaker 1: animal ever since birth, did his senior college thesis on bees.
• 37:17
  Speaker 1: And that's all it took to push me over the edge.
• 37:19
  Speaker 1: So in afternoon when wait, wait, wait, he does his
• 37:22
  Speaker 1: his college thesis prompted from you, unprovoked, totally independent, totally independent. No,
• 37:31
  Speaker 1: there was no leading the witness on that one. So
• 37:35
  Speaker 1: he's doing this and and so uh uh he and
• 37:39
  Speaker 1: I smuggle in a couple of highs one afternoon one.
• 37:43
  Speaker 1: What's how physically well the hive is the vertical essentially, Well,
• 37:48
  Speaker 1: you stack them up, you stack up the boxes. But
• 37:50
  Speaker 1: the but the box that the dimensions are are sixteen
• 37:54
  Speaker 1: and five inc inch wide, nineteen and seven acients long,
• 37:57
  Speaker 1: and they're varying depths. And I can explain to you
• 38:00
  Speaker 1: why they why the dimensions are Okay, this is very interesting.
• 38:03
  Speaker 1: Bees have have been kept since uh time in millennia.
• 38:08
  Speaker 1: Uh and by the way, honey never never spoiled. They've
• 38:11
  Speaker 1: taken it out of ancient Egyptian tombs which is just
• 38:14
  Speaker 1: as good as the day the bees made it. Really, Yeah,
• 38:16
  Speaker 1: I had no idea. I know it was good for
• 38:18
  Speaker 1: a long time. I don't know it was good o now.
• 38:21
  Speaker 1: Throughout this time though that they had bees, they were
• 38:25
  Speaker 1: in various cavities and so on. There's what's called the skeps,
• 38:29
  Speaker 1: which is a it's a series of concentric rings. Have
• 38:32
  Speaker 1: you ever seen a Utah road sign beehive state, that's
• 38:35
  Speaker 1: a skeps. You know. It's a traditional kind of round
• 38:39
  Speaker 1: kind of thing. And and and the bees would be
• 38:41
  Speaker 1: in there and they when the left of their own devices. Uh,
• 38:45
  Speaker 1: the bees make it has a hexonical cells, but they
• 38:48
  Speaker 1: look like stags being down. Well, the way they harvested
• 38:52
  Speaker 1: the honey was they basically killed the hive. They would
• 38:55
  Speaker 1: use sulfur smoke kill the hive and then crush the
• 38:58
  Speaker 1: combs to get the honey out. Well, that was very
• 39:01
  Speaker 1: inefficient because they had to have about twice as many
• 39:04
  Speaker 1: twice as many hives as they were going to harvest. Uh.
• 39:07
  Speaker 1: And also after the advent of kerosene, that's Colonel Drake
• 39:11
  Speaker 1: Droll as well, for lights, there was not the need
• 39:14
  Speaker 1: for bees wax for candles, so wax, and it takes
• 39:17
  Speaker 1: about ten times as much nectar to make a pound
• 39:20
  Speaker 1: of wax as a pound of honey, so this is
• 39:23
  Speaker 1: very inefficient. In eighteen fifty one eighteen fifty one. Now,
• 39:27
  Speaker 1: honey bees are from the old all from the old world.
• 39:29
  Speaker 1: They came here with the European settlers. The Indians called
• 39:32
  Speaker 1: them the white man's fly. But a congregational preacher in
• 39:36
  Speaker 1: Philadelphia named Lorenzo Langfroft, Lorenzo Langfroft made a very interesting observation.
• 39:43
  Speaker 1: He noticed that the v would only the bee would
• 39:45
  Speaker 1: only build, and the worker bees to do all this.
• 39:48
  Speaker 1: The drones don't do anything. She would only build her
• 39:51
  Speaker 1: comb within about three ace of an inch of any
• 39:53
  Speaker 1: other solid object, including another another comb. So he developed
• 39:58
  Speaker 1: from that what's called the movable frame five you might
• 40:01
  Speaker 1: you might our listeners may have seen those. In other words,
• 40:05
  Speaker 1: he put these in there, and and the bees they built,
• 40:09
  Speaker 1: they built out the wax coomb fill them upon. He
• 40:12
  Speaker 1: put a cap on there. You can take them out,
• 40:14
  Speaker 1: scratch off the caps, put in a central fuge, spin
• 40:16
  Speaker 1: them out and put them back. Okay, now coming back
• 40:19
  Speaker 1: to the dimensions. He's the father of modern beekeeping and
• 40:23
  Speaker 1: those dimensions that I mentioned sixteen and five hy those
• 40:27
  Speaker 1: were the dimensions of some scrap lumber he had. It
• 40:30
  Speaker 1: wasn't a conversion from Netrick, but he was so influential
• 40:34
  Speaker 1: that that became. Now it's a convenient size. But the
• 40:37
  Speaker 1: guy never made a dime out of this because it
• 40:39
  Speaker 1: was so easy to copy. But yeah, that and and
• 40:43
  Speaker 1: so that now and you have these These boxes are
• 40:46
  Speaker 1: various depths. There's usually do two boxes on the bottom
• 40:50
  Speaker 1: that the bees live in year round and they have
• 40:52
  Speaker 1: their honey to get through the winter. They have their
• 40:56
  Speaker 1: brewed in there, and they have um poland, which as
• 41:00
  Speaker 1: the nectar they feel they feed to the larva. And
• 41:03
  Speaker 1: those boxes nine nine and five ah deep, if they're
• 41:06
  Speaker 1: full of honey, they weave eighty five pounds. So the
• 41:09
  Speaker 1: ones you stack up on top are called supers, and
• 41:12
  Speaker 1: that's the honey we're gonna take off. And they're not
• 41:15
  Speaker 1: as deep as you can lift them, because try try
• 41:17
  Speaker 1: lifting eighty five pounds at at at at the shoulder height.
• 41:21
  Speaker 1: It's it's good for the for the stomach. Monthsls. My
• 41:25
  Speaker 1: dogways eighty five pound. One of my dogs eighty five pounds.
• 41:27
  Speaker 1: And I know when I had a carry him. I
• 41:30
  Speaker 1: know eighty five pounds an to lift um, so that's amazing.
• 41:35
  Speaker 1: So but anyway, start you've been doing decades. Yeah, we'll
• 41:39
  Speaker 1: start off. And anyway, this their son, Steve. He took
• 41:43
  Speaker 1: off for a job and the euro dollar pits in
• 41:46
  Speaker 1: the Chicago Murk and I and and I had been
• 41:49
  Speaker 1: I'd just been the flunky. He was a beekeeper. And
• 41:51
  Speaker 1: it was like, if you're ever driven with somebody repeatedly
• 41:54
  Speaker 1: to the same destination, they do the driving, you don't
• 41:56
  Speaker 1: pay attention. That was me. He takes off. I'm instantly
• 42:01
  Speaker 1: promoted a head beekeeper. So and I guess why then
• 42:04
  Speaker 1: we were upped about twenty hives and so how much
• 42:07
  Speaker 1: spaces is physically taking in the backyard. Well, I've got
• 42:10
  Speaker 1: fifteen of them in our residents in Short Hills, New Jersey.
• 42:13
  Speaker 1: And I've got about horror on the grounds underground, underground
• 42:18
  Speaker 1: in a corner of the property. Uh. And but I
• 42:21
  Speaker 1: got about a hundred hives total, and and most of
• 42:24
  Speaker 1: the well they're more further out Morristown, New Jersey area.
• 42:27
  Speaker 1: And then I've got some we have a beach house
• 42:29
  Speaker 1: on Fire Island some out there. But uh, but anyway,
• 42:32
  Speaker 1: but you know, this thing very it just keeps growing
• 42:35
  Speaker 1: and it's very labor intensive. But I got one. I
• 42:38
  Speaker 1: got a guy on my staff. We spend a lot
• 42:39
  Speaker 1: of time working with me on this. You're talking about
• 42:42
  Speaker 1: the bees labor or your labor, well and both. But
• 42:45
  Speaker 1: but I didn't attend the thing to grow. But the
• 42:48
  Speaker 1: damn thing just keeps growing. How many pounds of honey
• 42:51
  Speaker 1: do you generate? Well? Uh, this year, this year we
• 42:54
  Speaker 1: took off pounds and that's a ton of change of honey. Yeah,
• 42:58
  Speaker 1: and we give it all away. If I ever sold
• 43:01
  Speaker 1: any i'd have to keep keep keep the books. And
• 43:03
  Speaker 1: I don't want to make myself cry because my time
• 43:06
  Speaker 1: would be probably worth a quarter an hour and probably
• 43:08
  Speaker 1: with a minor sign in front of it. But it
• 43:11
  Speaker 1: very tremendously. Last year was our best year ever pounds
• 43:15
  Speaker 1: and we saw us three tons of hunter. Yeah, we
• 43:17
  Speaker 1: haven't stacked all over the office. And and my my admin,
• 43:21
  Speaker 1: Beth Grant, she keeps saying, come on, uh, we don't
• 43:23
  Speaker 1: need this much honey. I think she really hopes we
• 43:26
  Speaker 1: don't have a great year because trying to figure out
• 43:28
  Speaker 1: where we're gonna have stacked all over the place. So
• 43:30
  Speaker 1: what if how has these how how has these colony
• 43:36
  Speaker 1: collapse diseases been impacted your highs. That's probably one of
• 43:41
  Speaker 1: the biggest misconceptions. In two thousand seven sixty minutes, the
• 43:46
  Speaker 1: TV show did this segment on colony collapse disorder. Now,
• 43:51
  Speaker 1: what that means is the bees leave the hive and
• 43:54
  Speaker 1: they can't live long on their own outside. That's clear.
• 43:57
  Speaker 1: They don't come back. Um. And they said, this is
• 43:59
  Speaker 1: the the end of the world. Well, it's actually no more,
• 44:02
  Speaker 1: no more food pollination. About about a third of everything
• 44:06
  Speaker 1: we eat depends on insect pollination, andent of that is
• 44:11
  Speaker 1: from honey bees. In any event, they said at the
• 44:14
  Speaker 1: end of the world. Well, what they didn't really they
• 44:16
  Speaker 1: didn't do their homework, because this is a reoccurring problem. Uh,
• 44:20
  Speaker 1: it's about every twenty five years. The first observation of
• 44:22
  Speaker 1: this country was eighteen sixty nine, and it's gets on
• 44:26
  Speaker 1: the way. Now it's not the problem, but there are
• 44:28
  Speaker 1: but there are other serious problems. Uh well uh And
• 44:32
  Speaker 1: as a matter of fact, they just had a huge
• 44:33
  Speaker 1: study announced last year. All the big name U. S.
• 44:36
  Speaker 1: D A. Anomalogists and the guys from the big schools
• 44:40
  Speaker 1: where there you know, like Cornell and University of Maryland
• 44:43
  Speaker 1: and Penn State and U C. Davis and so on,
• 44:46
  Speaker 1: and they came up with three three areas, and everybody's
• 44:49
  Speaker 1: waiting with braided breath for what's the problem with bees?
• 44:51
  Speaker 1: How do we get out of this? The first one
• 44:53
  Speaker 1: has to be that's interesting, It isn't uh no, that's
• 44:58
  Speaker 1: the first guest. Pesticides. They said, maybe, but they're not
• 45:03
  Speaker 1: at all sure, and interestingly enough, their European counterparts were
• 45:07
  Speaker 1: absolutely possibly convinced it was pesticized, and two months ago
• 45:11
  Speaker 1: these Europeans said, we're not so sure. But that's one.
• 45:14
  Speaker 1: The second one is nutrition, farmers, fence, farmers, plant fence,
• 45:18
  Speaker 1: road defense road and there's not a lot of wildflowers
• 45:22
  Speaker 1: to give bees the the nectar and pollen that they need.
• 45:25
  Speaker 1: So what they're doing is there encurreaged road defense room,
• 45:27
  Speaker 1: meaning it's all cast crops, crops most of them don't
• 45:32
  Speaker 1: tend to have any nectar that are Pollen's interested in
• 45:34
  Speaker 1: the piece. But what they're doing now a lot of
• 45:36
  Speaker 1: cases is uh they're encouraging. They're encouraging farmers to use
• 45:42
  Speaker 1: marginal land to plan there. There's an outfit, for example,
• 45:44
  Speaker 1: called h called pheasants unlimited. Uh. They're in the Upper Midwest,
• 45:48
  Speaker 1: and they basically raised pheasants and quail for for hunters.
• 45:52
  Speaker 1: And and what they do is they provide the seed
• 45:55
  Speaker 1: to farmers and and uh, and the nectar and pollen
• 46:00
  Speaker 1: are as good for the bees, and then the seeds
• 46:02
  Speaker 1: that chicks the pheasants and the quail chicks eat it,
• 46:05
  Speaker 1: which makes them better to be harvested by the hunter.
• 46:08
  Speaker 1: So there, and then the third that's fascinating because there's
• 46:11
  Speaker 1: a farm near where I live, which is where I
• 46:14
  Speaker 1: get my peach raspberry pies, called Young's Farm, and I
• 46:18
  Speaker 1: noticed they have rows and rows of plantings. And then
• 46:22
  Speaker 1: along the edge which is adjacent to the street, probably
• 46:26
  Speaker 1: not harvestable. They have just a whole run of wildfire.
• 46:30
  Speaker 1: And that's that's what's being done. And that's that's helpful,
• 46:32
  Speaker 1: but it's you know, it's not on a big enough scale.
• 46:34
  Speaker 1: Then the third problem, which is probably most interesting, is
• 46:37
  Speaker 1: a parasitic mic called verroa v A r r O.
• 46:40
  Speaker 1: Read something about this. Now this is there there are
• 46:44
  Speaker 1: five races of honey bees. The only one that's commercially
• 46:49
  Speaker 1: valuable is UH. The Latin. The scientific name is APIs
• 46:53
  Speaker 1: malafra APIs b malafra honey. Um. Now that one orange
• 47:00
  Speaker 1: original bees are off from the whole, from the from
• 47:02
  Speaker 1: the old world. This one originated in in uh Southern
• 47:05
  Speaker 1: Europe and the Middle East. There's another race in the
• 47:08
  Speaker 1: in the Southeast Asia called APIs Serena. And this this
• 47:13
  Speaker 1: roa mite is indigenous indigenous on APIs Serena and APIs.
• 47:18
  Speaker 1: And this this roa mites hangs on the bee, sucks
• 47:21
  Speaker 1: out there quota or blood. APIs SaRenna recognized this as
• 47:24
  Speaker 1: the bad guy, and they grew them off each other.
• 47:26
  Speaker 1: They pull them off each other. It jumped over the
• 47:29
  Speaker 1: Apisa and they don't understand it's a bad guy. So
• 47:33
  Speaker 1: you and and so one they co evolved together, and
• 47:36
  Speaker 1: that's how they managed to whoever figured out you need
• 47:39
  Speaker 1: to take this off. Now we see their offspring around.
• 47:42
  Speaker 1: If you didn't co evolve, you may not have developed
• 47:44
  Speaker 1: that behavior. But but now they're they're they're right. Now
• 47:48
  Speaker 1: you've got to treat with chemicals. Um are absolutely positively
• 47:52
  Speaker 1: that high will be done in two years now. Yeah, yeah,
• 47:55
  Speaker 1: you don't treat until you take off the honey. But
• 47:56
  Speaker 1: we're gonna eat, of course. But they're but they're doing
• 47:59
  Speaker 1: some interesting things. Monshano has some interesting work where they
• 48:03
  Speaker 1: kill the mites believe the bees that you're trying to
• 48:06
  Speaker 1: kill one insect without killing another insight, and they're and
• 48:09
  Speaker 1: they're using some genetic uh, some some genetic modifications to
• 48:15
  Speaker 1: basically in effect try to disrupt the breeding cycle of
• 48:18
  Speaker 1: of the mice. That's a that's an experimental stage, but
• 48:22
  Speaker 1: that that has that's probably the greatest thing. But this
• 48:25
  Speaker 1: is this is a serious problem. And the thing is
• 48:27
  Speaker 1: he's mice mutate. I mean that the treatments that worked
• 48:30
  Speaker 1: just beautifully ten years ago are worth anything because they mutated,
• 48:34
  Speaker 1: and the ones now sounds like penicillin resistance. It's a
• 48:41
  Speaker 1: how did you get from? It's amazing how first of
• 48:44
  Speaker 1: all you you've obviously studied this in great detail, But
• 48:48
  Speaker 1: as an economist, I don't really think of the next
• 48:52
  Speaker 1: logical step as well. Of course, beekeeping should be well
• 48:57
  Speaker 1: that there there are, there are, there are, and treads
• 49:00
  Speaker 1: aybury and such as okay, well let's see. Well the
• 49:04
  Speaker 1: one that is not common but I like is it's
• 49:06
  Speaker 1: good physical exercise and particularly on a nice day, I
• 49:10
  Speaker 1: like to be outside. Uh. And you don't get a
• 49:12
  Speaker 1: lot of that when you're sitting behind your desk on
• 49:15
  Speaker 1: the lecture circuit or whatever. But you see the distribution
• 49:17
  Speaker 1: of labor amongst the hives, that's got to be an
• 49:19
  Speaker 1: entire Yeah. But the other interesting thing is that this
• 49:23
  Speaker 1: with all these diseases and pests that beset honey bees
• 49:26
  Speaker 1: in the last couple of decades, it is Uh, there's
• 49:29
  Speaker 1: a whole logic, deductive logic sequence I go through when
• 49:34
  Speaker 1: I open a hive. I open a hive, I'm looking,
• 49:36
  Speaker 1: I'm listening, I'm smelling. Is there a coin there is
• 49:39
  Speaker 1: she laying? If not, what do I do? I come
• 49:42
  Speaker 1: home from a day in the in the b yards
• 49:44
  Speaker 1: out with the bees, I'm rung out, not only physically
• 49:46
  Speaker 1: but mentally. You wouldn't think that, but it is. And
• 49:49
  Speaker 1: and beekeepers tend to be above average intellect. You've got
• 49:53
  Speaker 1: to have a natural curiosity because and another interest. Economists
• 49:57
  Speaker 1: just average inte life. So so bas you're saying that
• 50:03
  Speaker 1: the beekeeping is a greater intellectual challenge than No, I'm
• 50:06
  Speaker 1: not saying greater, but that's what I'm here. I'm hearing.
• 50:09
  Speaker 1: Anyone can be an economist to be a beekeeper. And
• 50:12
  Speaker 1: I know economics, it's plenty, but it's it's it's a
• 50:15
  Speaker 1: di virgence. It's it's it's sort of a you know,
• 50:18
  Speaker 1: I'm a type of guy. I always work. I just
• 50:20
  Speaker 1: change the venue and and and that's what it amounts to.
• 50:23
  Speaker 1: Where you're you're shifting, you're shifting gears to to something else,
• 50:26
  Speaker 1: but you're still going through that that mental process of
• 50:30
  Speaker 1: trying to figure out what's going on there. It's like
• 50:32
  Speaker 1: it's like the economy you're trying to you're trying to
• 50:35
  Speaker 1: put all that we talked about this earlier, trying to
• 50:36
  Speaker 1: put all these pieces together and see where you come out.
• 50:39
  Speaker 1: And uh, and you're never can be certain and and
• 50:42
  Speaker 1: and be keeping Hey, the visistant visistitudes the nature are tremendous.
• 50:46
  Speaker 1: You do everything you possibly can. It's just like a forecast.
• 50:49
  Speaker 1: You cover all the bases and you're you're left a
• 50:53
  Speaker 1: certain amount of luck some rents from then. You know.
• 50:55
  Speaker 1: I just I just was speaking at a conference and
• 50:58
  Speaker 1: the exact same convert station came up with you do
• 51:02
  Speaker 1: X and Y and Z. They all seem so different.
• 51:05
  Speaker 1: In my answer was they're really the same thing. You
• 51:07
  Speaker 1: look at a variety of ambiguous inputs, try and figure
• 51:10
  Speaker 1: out what matters and what doesn't and reach a reasonable
• 51:14
  Speaker 1: conclusion within the context be keeping in economics, apparently the
• 51:19
  Speaker 1: same same basic the process is what's so similar even
• 51:23
  Speaker 1: though it's totally different. Um that that that that's quite fascinating.
• 51:29
  Speaker 1: So earlier we were talking a little bit about, um,
• 51:33
  Speaker 1: what it was like when you were researcher at Mary
• 51:35
  Speaker 1: lynch In a researcher at the Federal Reserve. What what
• 51:38
  Speaker 1: are some of your commentaries or research forecasts that you're
• 51:44
  Speaker 1: especially proud of that really have stood the test in
• 51:48
  Speaker 1: time or may have been unusually contrarian. What what stands
• 51:53
  Speaker 1: out to you? Well? I think I think the greatest
• 51:55
  Speaker 1: call I made was just one. I made a bullmark
• 52:00
  Speaker 1: that we're entering a von Rally of a lifetime. And
• 52:02
  Speaker 1: was that a lonely call? Where there are peoples? Barry
• 52:05
  Speaker 1: was so lonely. I wrote my first book in title
• 52:10
  Speaker 1: The title was is inflation ending? Question mark? Are you ready?
• 52:14
  Speaker 1: Question Mark? My answer to the first question, yes, Yes,
• 52:17
  Speaker 1: inflation is ending. We're going into a period of of
• 52:21
  Speaker 1: lower and lower inflation because my view is at government
• 52:25
  Speaker 1: excess spending is the route of inflation. The FED may
• 52:28
  Speaker 1: be the handmaiden and implementing you. But it's the government spending.
• 52:32
  Speaker 1: And we saw a revolt against government, starting with Proposition
• 52:35
  Speaker 1: thirteen in California in nineteen seventy eight and then Reagan's
• 52:38
  Speaker 1: election in nine eighty. And I said from that that
• 52:42
  Speaker 1: inflation was on the way out, and as a result,
• 52:44
  Speaker 1: we were. And so the answer to the second half
• 52:47
  Speaker 1: of the question, are you ready, no, because everybody was
• 52:50
  Speaker 1: betting on inflation. They had all their tangibles and their portfolios, uh, coins, antiques, artwork, goal, etcetera.
• 52:57
  Speaker 1: And I said, no, no, you don't have enough stocks
• 52:59
  Speaker 1: or bonds because they will benefit from this. Now, that
• 53:02
  Speaker 1: was a very lonely call that book. Mcgrawl hill finally
• 53:05
  Speaker 1: got it out in nobody but inflation really peaked in
• 53:11
  Speaker 1: nineteen eighty, but nobody believed. The sales of the book
• 53:15
  Speaker 1: were an absolute disaster. As a matter of fact, McGraw
• 53:17
  Speaker 1: hill gave us the last couple of thousand copies. They
• 53:20
  Speaker 1: didn't want him. But it was but interesting in six
• 53:25
  Speaker 1: By then it was clear that inflation was fading. Uh.
• 53:28
  Speaker 1: There were two ex post reviews. One was in the
• 53:31
  Speaker 1: Boston Globe and the other was a Seattle Post Intelligencer
• 53:34
  Speaker 1: and they both you know, and both of these business
• 53:37
  Speaker 1: editors said, I saw this book, Oh my god, it
• 53:39
  Speaker 1: was happening, and they and so they wrote reviews. Well,
• 53:42
  Speaker 1: of course that was his hand as a pocketing your
• 53:43
  Speaker 1: underwear because the book was long out of print. But
• 53:46
  Speaker 1: it was a paric victory. But but yeah, I mean
• 53:49
  Speaker 1: that was that was very longly. I don't think there
• 53:51
  Speaker 1: was anybody else, at least notable known forecaster who was
• 53:54
  Speaker 1: saying anything like that. So so let me push back
• 53:57
  Speaker 1: about your your claim that it's the government's bending and
• 54:00
  Speaker 1: deficits that cause inflation. We have a nineteen trillion dollar
• 54:05
  Speaker 1: federal deficit and yet inflation is well non existent and
• 54:09
  Speaker 1: and going hard. Yeah, it's it's uh, yeah, I have
• 54:12
  Speaker 1: to fill that out and say, it depends on the
• 54:14
  Speaker 1: rest of the economy if you have an over employed
• 54:17
  Speaker 1: economy to start with, and then you put all that
• 54:19
  Speaker 1: government spending on top of it. But what you see,
• 54:22
  Speaker 1: that's what happened in the late sixties and seventies very
• 54:25
  Speaker 1: different today. You had, Yeah, you had a huge government
• 54:28
  Speaker 1: spending on war, on poverty and war in Vietnam, and
• 54:32
  Speaker 1: that really strained resources on top of a twenty year
• 54:36
  Speaker 1: private sector bull market generated generated all that inflation. Well,
• 54:42
  Speaker 1: again you've got the reversal that starting. And so now
• 54:45
  Speaker 1: we have the retiring boomers, We have a whole lot
• 54:48
  Speaker 1: of underemployment. People working part time would rather work full time.
• 54:52
  Speaker 1: Um what else do we have in this environment? You
• 54:55
  Speaker 1: have increased global Yeah, that that's that's I think that's
• 54:59
  Speaker 1: been the greatest The greatest change in the last thirty
• 55:02
  Speaker 1: years is globalization. And so let's talk about globalization, but
• 55:05
  Speaker 1: I also want to get to I also want to
• 55:09
  Speaker 1: get to increased productivity and increased automation as other factors
• 55:13
  Speaker 1: that are driving this. So what has been the impact
• 55:16
  Speaker 1: of globalization on wages both here in the US and worldwide? Well,
• 55:22
  Speaker 1: it's a great equalizes are of wages obviously. UM. I
• 55:26
  Speaker 1: had was very interesting. This goes back years ago. Milton
• 55:30
  Speaker 1: Friedman had read one of my books. He was in
• 55:32
  Speaker 1: San Francisco. He invited me in. It was in an
• 55:35
  Speaker 1: apartment there, uh greeting me at the door, hadn't shaved
• 55:39
  Speaker 1: in three days, had a bathrobe on. We sat there
• 55:42
  Speaker 1: for about three hours talking about about inflation and wages
• 55:46
  Speaker 1: and of course what was this Oh gosh, this was
• 55:49
  Speaker 1: this is about the mid eighties. And and his point,
• 55:52
  Speaker 1: of course is that that free markets govern everything, that
• 55:55
  Speaker 1: there's nothing else but and and uh and and I
• 55:59
  Speaker 1: was saying, well, you know, wages, you're here, You've got
• 56:03
  Speaker 1: an hour you know for the U A W I
• 56:05
  Speaker 1: think in this country and two dollars an hour in Mexico.
• 56:08
  Speaker 1: And I said, you know, you think it's gonna happen,
• 56:11
  Speaker 1: These are gonna equate. Well, they have come a lot closer.
• 56:14
  Speaker 1: And and that's what that's what's happened, is that is
• 56:16
  Speaker 1: that this is globalization. And of course you had a
• 56:19
  Speaker 1: lot of American labor which was enjoying, uh was enjoying
• 56:23
  Speaker 1: the fruits of basically isolation. I mean, we did not
• 56:26
  Speaker 1: have global competition. But that's clearly changed. Yeah, that that's
• 56:30
  Speaker 1: clearly changed. And so what it means is that we
• 56:32
  Speaker 1: simply can I compete in in uh, basic manufacturing or anything.
• 56:37
  Speaker 1: Even services. You know, you talk about doing routine legal services.
• 56:40
  Speaker 1: They do that in India, any place they speak English,
• 56:42
  Speaker 1: call centers and so on. So globalization has been a
• 56:46
  Speaker 1: very very important factor. And we're dealing with the we're
• 56:49
  Speaker 1: dealing with the aftermath of that right now. So let's
• 56:52
  Speaker 1: let's along those lines. Let's talk about demographics and retiring
• 56:56
  Speaker 1: baby boomers. What does that mean for the overall economy?
• 56:59
  Speaker 1: What does that mean for job possibilities and wages? Well,
• 57:04
  Speaker 1: what's interesting about that is that is that people are retiring.
• 57:08
  Speaker 1: As a matter of fact, the reason the unemployment rate
• 57:10
  Speaker 1: has come down uh is UH is basically the people
• 57:15
  Speaker 1: dropping out of the labor for what percentage of the
• 57:18
  Speaker 1: fall from ten point whatever to five point one percent
• 57:21
  Speaker 1: unemployment is people leaving the way little labor for well,
• 57:25
  Speaker 1: let's put it this way. If you didn't have if
• 57:27
  Speaker 1: you hadn't had the if you hadn't had this participation rate,
• 57:30
  Speaker 1: which is anybody sixteen and over who is either at
• 57:33
  Speaker 1: working or actively looking for work, if you hadn't had
• 57:35
  Speaker 1: that decline from the peak in February of two thousand,
• 57:38
  Speaker 1: the unemployment rate today would not not not so that
• 57:43
  Speaker 1: many people have left the workforce but are still of working. Well, well, no, no, no,
• 57:48
  Speaker 1: that's everybody. Now, we we've got a lot of work
• 57:50
  Speaker 1: on that. About six of that are people are over
• 57:53
  Speaker 1: are people retiring the post of as retiring, but are
• 57:58
  Speaker 1: middle aged people who said, you know, I can't find
• 58:01
  Speaker 1: a job, And of course, a lot of younger people
• 58:03
  Speaker 1: who said, I'm going to stay in college, I hope
• 58:05
  Speaker 1: I get a better job. Of course a lot of
• 58:07
  Speaker 1: them came out with big deaths but no better job prospects.
• 58:10
  Speaker 1: But what's fascinating about this With older people, and you're
• 58:12
  Speaker 1: talking about retiring poster or babies, the participation rates of
• 58:16
  Speaker 1: people UH sixty five to seventy four have gone up,
• 58:19
  Speaker 1: still pretty good lower, they're lower than younger people, but
• 58:23
  Speaker 1: they're going up and over seventy five. And why is that?
• 58:26
  Speaker 1: Two reasons. One is people in better health, they're living longer,
• 58:28
  Speaker 1: they want to stay actively. Also, a lot of people
• 58:31
  Speaker 1: simply do not have the access to retire, So you're
• 58:33
  Speaker 1: getting some very interesting diamics within that. But but the
• 58:37
  Speaker 1: bottom line is there are a lot of people out
• 58:39
  Speaker 1: there now training, having the skills to take jobs. That's
• 58:44
  Speaker 1: another issue. But if if you assume, if you get
• 58:46
  Speaker 1: people properly trained, there's there's really no shortage of labor
• 58:50
  Speaker 1: in the foreseeable future, that's amazing. So let's talk along
• 58:54
  Speaker 1: related lines. Let's talk about productivity gains and you directly automation.
• 59:01
  Speaker 1: What is the impact of Like in my office, I know,
• 59:04
  Speaker 1: we were six seven, we're now seven people were about
• 59:08
  Speaker 1: to be eight people. I know that to do what
• 59:11
  Speaker 1: we do thirty years ago would have taken fifty people,
• 59:16
  Speaker 1: and thanks to computer technology and software, each person does.
• 59:22
  Speaker 1: We don't have a bookkeeper. We outsource that to uh
• 59:25
  Speaker 1: an accountant who looks at stuff quarterly, who sees everything online.
• 59:29
  Speaker 1: A lot of the stuff that we used to do
• 59:31
  Speaker 1: with an assistant and a secretary, we that's all automatic.
• 59:36
  Speaker 1: It's all done on the on the everybody types. It's
• 59:39
  Speaker 1: not like you can be an executive type. And so
• 59:42
  Speaker 1: you're doing entering everything into the into the computer. And
• 59:45
  Speaker 1: then when you look at different tools like like what
• 59:49
  Speaker 1: we get from Salesforce as an example, as a sales
• 59:53
  Speaker 1: management of CRM tool, that would have been somebody's full
• 59:57
  Speaker 1: time job and now it's one piece of software for
• 1:00:00
  Speaker 1: eight people, it's amazing how much more productive each of
• 1:00:04
  Speaker 1: us are. What does that do to to job creation? Well, uh,
• 1:00:10
  Speaker 1: you know, the whole the whole idea of industrialization ever
• 1:00:14
  Speaker 1: since the industry revolution started in England and New England
• 1:00:17
  Speaker 1: in late seventeen hundreds, was that it destroys a lot
• 1:00:20
  Speaker 1: of jobs. You know that, you know that the origin
• 1:00:22
  Speaker 1: of the word saboteur okay, sabbath. It comes from sabbath
• 1:00:27
  Speaker 1: which were wooden shoes, and earlier the ductal Revolution, the
• 1:00:31
  Speaker 1: workers wore wooden shoes, would grind him in the machines,
• 1:00:33
  Speaker 1: direct the machines because it was putting people out of work.
• 1:00:36
  Speaker 1: They wanted to go back to hand weavers and ah as.
• 1:00:38
  Speaker 1: You've always had this specter of of the destruction of
• 1:00:42
  Speaker 1: jobs by automation. But but what has happened. Of course,
• 1:00:45
  Speaker 1: it's created more jobs, and higher level jobs and higher
• 1:00:48
  Speaker 1: page jobs with more productivity, and that's the basis of
• 1:00:52
  Speaker 1: living standards. We've come to a we've come to a
• 1:00:55
  Speaker 1: bit of a gap recently with globalization. That's one of
• 1:00:57
  Speaker 1: the reasons I think globalization is so important because it's
• 1:01:00
  Speaker 1: given you this huge gap, in other words, more rather
• 1:01:03
  Speaker 1: than a gradual increase in this transfer and and and
• 1:01:07
  Speaker 1: upgrading and so on and getting rid of the secretaries
• 1:01:10
  Speaker 1: and the in house accountants and all the stuff you mentioned. Uh,
• 1:01:13
  Speaker 1: that's happened overnight, and it is simply left a lot
• 1:01:16
  Speaker 1: of people in the US and other western Western economies
• 1:01:20
  Speaker 1: who simply are are not making that transition and not
• 1:01:24
  Speaker 1: prepared to that and it may be a generational deal,
• 1:01:27
  Speaker 1: and I don't think it's the end of the world,
• 1:01:28
  Speaker 1: but it is a it is almost a a quantum
• 1:01:32
  Speaker 1: shift shift there because of globalization. So so you mentioned
• 1:01:36
  Speaker 1: that as we've gone through the industrial era and as
• 1:01:38
  Speaker 1: we've seen um more and more heavy manufacturing put people
• 1:01:43
  Speaker 1: out of work, but at the same time creat other jobs.
• 1:01:46
  Speaker 1: When we look at technology technical especially biotech, internet, computer technology,
• 1:01:54
  Speaker 1: the amount of job loss that that's created, is that
• 1:01:59
  Speaker 1: really going to be offset by new and related jobs
• 1:02:02
  Speaker 1: in that space, Because that's the big concern of a
• 1:02:04
  Speaker 1: lot of people, is that there are people who are
• 1:02:07
  Speaker 1: creating software, creating technology that allows each person to do
• 1:02:12
  Speaker 1: so much more. You've eliminated a huge swath of jobs.
• 1:02:17
  Speaker 1: The jobs are being created just where that Where are
• 1:02:19
  Speaker 1: they geographically? In other ways, are they in this country
• 1:02:23
  Speaker 1: or are they in China? And now low end manufacturing
• 1:02:26
  Speaker 1: moving on from China to lower cost areas Bangladesh, Vietnam,
• 1:02:31
  Speaker 1: Pakistan and so on. Well, we see the iPhone which
• 1:02:33
  Speaker 1: is designed in the in the United States, design in
• 1:02:36
  Speaker 1: San Francisco, but essentially it's manufactured in China, with components
• 1:02:41
  Speaker 1: and other parts made all of the world. But the
• 1:02:44
  Speaker 1: bulk of which are in low cost countries. So what
• 1:02:48
  Speaker 1: is and yet there's also an app economy where all
• 1:02:51
  Speaker 1: these software designers and all these people are making a
• 1:02:53
  Speaker 1: whole run of different software to put on that that
• 1:02:58
  Speaker 1: work pretty much anywhere, but they're mostly the United States, UM, Europe, India, Japan,
• 1:03:05
  Speaker 1: places like that. So is that technology creating more jobs?
• 1:03:10
  Speaker 1: And it's creates creating more jobs, and of course it's
• 1:03:13
  Speaker 1: it's adding to income polarization because those are those yeah,
• 1:03:17
  Speaker 1: those are those are high skilled jobs, those are high
• 1:03:19
  Speaker 1: paid jobs. But what you've eliminated are these auto factories
• 1:03:24
  Speaker 1: in this country that employed five thousand people that that's
• 1:03:26
  Speaker 1: out Now. One of the interesting things coming out of this,
• 1:03:29
  Speaker 1: and particularly with what's going on right now, we've had
• 1:03:32
  Speaker 1: eight years of basically no real income growth in the
• 1:03:36
  Speaker 1: US and really Europe, Japan they developed world nowers adjusted
• 1:03:40
  Speaker 1: for inflation, no no growth. People get frustrated after a
• 1:03:44
  Speaker 1: while of that, and what's happening. We're beginning to see
• 1:03:47
  Speaker 1: that expressed politically. For example, in France, the National Front
• 1:03:52
  Speaker 1: headed by this woman Maria la Penn. She may be
• 1:03:55
  Speaker 1: the next president of France. It's a very you may
• 1:03:58
  Speaker 1: end up with Bernie Sanders or done Trump in the
• 1:04:01
  Speaker 1: in the US, and and of course John Baynor, you know,
• 1:04:07
  Speaker 1: and there's this reaction to politicians in the center and
• 1:04:10
  Speaker 1: looking at the fringes UK the head of the new
• 1:04:14
  Speaker 1: head of the Labor Party. I mean, you're getting very
• 1:04:17
  Speaker 1: interesting expressions of this. UH. And of course you know
• 1:04:20
  Speaker 1: we're not talking about French revolutions now where people out
• 1:04:22
  Speaker 1: there tear it down the beast steel, but it is
• 1:04:25
  Speaker 1: it is a similar kind of impulse and we could
• 1:04:28
  Speaker 1: get some very interesting political ramifications. So we just saw
• 1:04:32
  Speaker 1: that in Greece with Left coalition. Although I will tell
• 1:04:37
  Speaker 1: you the craziest thing, so we're recording this UH in
• 1:04:41
  Speaker 1: the beginning of fall two thousand and fifteen, so we
• 1:04:44
  Speaker 1: don't know the outcome of the election for any of
• 1:04:46
  Speaker 1: you in the future listening to this. We don't know
• 1:04:48
  Speaker 1: a lot of things. But one of the things that
• 1:04:50
  Speaker 1: I find fascinating is when you look at the shocking
• 1:04:54
  Speaker 1: and sudden rise of Donald Trump politically, he's much more
• 1:04:58
  Speaker 1: centrist then either the bulk of the Republicans on the
• 1:05:03
  Speaker 1: right and the bulk of the Democrats on the left.
• 1:05:06
  Speaker 1: I'm amazed that when you strip away the bluster. He's
• 1:05:11
  Speaker 1: kind of a centrist, old school politician. How did who
• 1:05:16
  Speaker 1: would have saw that coming? A few Yeah, but you know,
• 1:05:18
  Speaker 1: it's a hell raising aspect. It's like what was that
• 1:05:20
  Speaker 1: movie Network News where the guys because you know, I'm
• 1:05:23
  Speaker 1: not going to take it an Yeah, absolutely, I mean
• 1:05:27
  Speaker 1: it's it's that it's that same kind of the same
• 1:05:30
  Speaker 1: kind of reaction, and that's what he's Bernie Sanders. I mean,
• 1:05:33
  Speaker 1: of course he's way to the left, but it's that
• 1:05:34
  Speaker 1: same kind of same kind of appeal. It's kind of saying,
• 1:05:38
  Speaker 1: the centers politicians have not solved the problems. We got
• 1:05:41
  Speaker 1: to do something else, and and there's a there's a
• 1:05:43
  Speaker 1: big hearing for that kind of thing. So this is
• 1:05:46
  Speaker 1: a this is a this is a kind of a
• 1:05:48
  Speaker 1: cycle within the cycle, if you want to use cycles.
• 1:05:51
  Speaker 1: And we talked about whether they're relevant or not. But
• 1:05:53
  Speaker 1: you've had you've had globalization going on for you know,
• 1:05:55
  Speaker 1: about three decades. But now in the aftermath of the
• 1:05:59
  Speaker 1: global Great Recession oh seven oh nine, we're having this
• 1:06:03
  Speaker 1: period of slow growth, as I called the age of
• 1:06:05
  Speaker 1: d leveraging, no no growth and real incomes. And and
• 1:06:09
  Speaker 1: as a result, I think the combination of these things
• 1:06:12
  Speaker 1: is putting a lot of pressure on the political system
• 1:06:14
  Speaker 1: and and the conventional politicians really don't know how to
• 1:06:17
  Speaker 1: react to this. So let me ask you a question
• 1:06:18
  Speaker 1: about that. And I'm not sure where I pulled this
• 1:06:21
  Speaker 1: number from, but there was some news article out not
• 1:06:24
  Speaker 1: too long ago that said, the middle class has not
• 1:06:28
  Speaker 1: seen in real terms, um forget nominal terms, but in
• 1:06:33
  Speaker 1: real terms, has not really seen wage gains since nineteen three.
• 1:06:37
  Speaker 1: I think that's I think that's I think that's probably valid. Yeah,
• 1:06:40
  Speaker 1: if you look at if you look at real wages
• 1:06:44
  Speaker 1: and uh, you know that pretty much is that their
• 1:06:47
  Speaker 1: insurance costs are up in the Indian real family income,
• 1:06:51
  Speaker 1: That's that's what those statistics show you. And and you
• 1:06:54
  Speaker 1: know the growth has has come on on the on
• 1:06:56
  Speaker 1: the top. There's a lot of income redistribution to look
• 1:06:59
  Speaker 1: people on the bottom. And you know, people can say, oh,
• 1:07:01
  Speaker 1: this is this is terrible, and of course the pope
• 1:07:03
  Speaker 1: is that was his theme as as well. But you know,
• 1:07:06
  Speaker 1: you say, if you if you have rapid growth, if
• 1:07:08
  Speaker 1: you have a dynamic economy, it is going to sort
• 1:07:11
  Speaker 1: out the people who have the skills in order to participate.
• 1:07:16
  Speaker 1: You look at China. Look how many billionaires are in China?
• 1:07:20
  Speaker 1: And you say, well, yeah, but this is a country
• 1:07:21
  Speaker 1: with a average income of what about a sixth of
• 1:07:24
  Speaker 1: what we have. But yet when you see dynamics the
• 1:07:28
  Speaker 1: people who take up, now you can say, well, that's
• 1:07:30
  Speaker 1: not that's not equal distribution. But that's a judgment call,
• 1:07:33
  Speaker 1: that's not a market call. So what does the United
• 1:07:36
  Speaker 1: States need to do to sort of restart that economic
• 1:07:39
  Speaker 1: engine and go from forget five percent, how about going
• 1:07:43
  Speaker 1: from two percent to over three percent? Well, I think
• 1:07:46
  Speaker 1: I think a certain extent, it's really just a matter
• 1:07:49
  Speaker 1: of having patients and letting this whole agent be leveraging
• 1:07:52
  Speaker 1: and run its course. Now, once people are no longer
• 1:07:54
  Speaker 1: buried with debt they picked up in the last cycle,
• 1:07:58
  Speaker 1: that's right activity that's after that, we are going to
• 1:08:00
  Speaker 1: see a return to rapid growth and it will be
• 1:08:03
  Speaker 1: led by by technology and productivity. So you're up for
• 1:08:07
  Speaker 1: a guy who's says the bond bull market is still here.
• 1:08:10
  Speaker 1: You're fairly optimistic. Oh, I am in the long run,
• 1:08:13
  Speaker 1: very much so. And one of the reasons is my
• 1:08:15
  Speaker 1: basic philosophy. You know, I mean, right now, the easy
• 1:08:19
  Speaker 1: long term uh forecast to sell is slow growth forever.
• 1:08:24
  Speaker 1: Because everybody looks around us. That's what I see right on, brother,
• 1:08:27
  Speaker 1: You look at people like like Bob Gordon, Professor Northwestern.
• 1:08:31
  Speaker 1: He's going around saying everything that is really productive, that's
• 1:08:35
  Speaker 1: worth inventing, has been invented. Modern, by the way, we've
• 1:08:38
  Speaker 1: heard that throughout the centuries, and it's always been wrong.
• 1:08:41
  Speaker 1: Modern ma enthusian, and it sells very well. Neil Ferguson
• 1:08:44
  Speaker 1: at Harvard, Uh, things are being dragged down by dragged
• 1:08:48
  Speaker 1: down by regulation and so on. Larry Summers, you know,
• 1:08:52
  Speaker 1: democratic fergusonsest stick to history. He's a terrible economic connentator.
• 1:08:56
  Speaker 1: Every time he talks about economics, he manages to get something. Well,
• 1:08:59
  Speaker 1: it's not major. But what what I'm saying, Barry, is
• 1:09:03
  Speaker 1: that that's the easy cell. And you know, I'm always yeah,
• 1:09:07
  Speaker 1: it's yeah, And I'm always looking for, you know, where's
• 1:09:10
  Speaker 1: the hidden flaw that that's that's that's how I made
• 1:09:12
  Speaker 1: my career, is looking for where's the where's the why
• 1:09:16
  Speaker 1: is it going to go wrong? And in this case,
• 1:09:18
  Speaker 1: you know, for example, they say that, uh, Gordon says
• 1:09:22
  Speaker 1: that the Internet and so on is finished. Computers, it's
• 1:09:26
  Speaker 1: all realized I think those things are more in their
• 1:09:28
  Speaker 1: infancy than there are for I mean, just just you
• 1:09:31
  Speaker 1: be a couple of examples. The American Industrial Revolution started
• 1:09:35
  Speaker 1: in the late seventeen hundreds, grew like topsy, but it
• 1:09:39
  Speaker 1: didn't get big enough to move the economy until after
• 1:09:42
  Speaker 1: the Civil War. I mean it ter yeah, railroads again
• 1:09:47
  Speaker 1: they started l seventeen hundreds, not until the latter half
• 1:09:50
  Speaker 1: of the nineteenth century. I mean, it takes a long
• 1:09:53
  Speaker 1: time for these things. And you know, you look at you,
• 1:09:56
  Speaker 1: and I have have cell phone. I mean this has
• 1:09:58
  Speaker 1: got more computer partner I b M three sixty this
• 1:10:01
  Speaker 1: this little gasht in your pocket. I jokingly tell people
• 1:10:04
  Speaker 1: there's more computing power on this than took Man to
• 1:10:07
  Speaker 1: the moon with it really is. And and I look,
• 1:10:10
  Speaker 1: and I was taking some pictures and here I am
• 1:10:13
  Speaker 1: on our beach house here, you know, at home around
• 1:10:15
  Speaker 1: I've got just where it records where it is. I mean,
• 1:10:17
  Speaker 1: it's a big brother knows where you are. But but
• 1:10:20
  Speaker 1: but my opinion that we are more in the infancy
• 1:10:25
  Speaker 1: than we are finished on these new technology. Biotechnology, I
• 1:10:28
  Speaker 1: think is is much much more in its infancy and
• 1:10:31
  Speaker 1: what that is going to do for productivity growth in
• 1:10:34
  Speaker 1: the future. Now again, you're gonna have people who have
• 1:10:36
  Speaker 1: the right training. But you know, one of the problems
• 1:10:39
  Speaker 1: we have in this country. One of the problems we
• 1:10:41
  Speaker 1: have in this problem country. And there's a different topics,
• 1:10:44
  Speaker 1: but I think related is the education system and and
• 1:10:48
  Speaker 1: and you know, we have the attitude, Um, we have
• 1:10:51
  Speaker 1: the attitude that everybody ought to go to college. And
• 1:10:54
  Speaker 1: it is true that people with college educations make more
• 1:10:57
  Speaker 1: than high school grads. But you can't prove causality with statistics.
• 1:11:02
  Speaker 1: I guarantee you positively, absolutely, every time there's a total
• 1:11:05
  Speaker 1: eclipse of the of the sun, if you go outside
• 1:11:07
  Speaker 1: and beat a drum, it will go away hard percent correlation,
• 1:11:11
  Speaker 1: no causality. The reality is, in my view, smart people
• 1:11:15
  Speaker 1: go to college. But college doesn't make you smart. And
• 1:11:18
  Speaker 1: I think we need to recognize that and say, Okay,
• 1:11:21
  Speaker 1: there are a lot of people who can have very
• 1:11:23
  Speaker 1: credible jobs. Hey, what's the last time you hired a
• 1:11:26
  Speaker 1: plumber to clean out a toilet? News charge your hundred
• 1:11:29
  Speaker 1: bucks for fifteen minutes work. I mean, you know, there
• 1:11:31
  Speaker 1: are a lot of jobs that are not college educations,
• 1:11:35
  Speaker 1: but they're certainly very credible. There's six estimates are the
• 1:11:39
  Speaker 1: six hundred thousand jobs going begging now for people with
• 1:11:42
  Speaker 1: computer skills to work in factories. And one of the
• 1:11:45
  Speaker 1: things that's happening to solve that is the Germans. They
• 1:11:48
  Speaker 1: have a very strong apprenticeship program history. They brought a
• 1:11:52
  Speaker 1: lot of their plants in the southeast and this country
• 1:11:55
  Speaker 1: and they have these apprenticeship programs combined with two year
• 1:11:58
  Speaker 1: community college degrees, and these guys come out and they're
• 1:12:01
  Speaker 1: very well paid. And American companies are emulating that same
• 1:12:04
  Speaker 1: kind of thing. So I think that's one of the
• 1:12:06
  Speaker 1: most exciting things in education that this isn't say everybody,
• 1:12:09
  Speaker 1: and you know, we have a college for any for
• 1:12:12
  Speaker 1: any intellectual capability in this country. Look at the poor
• 1:12:16
  Speaker 1: profit college is absolute disaster total. They wouldn't exist without
• 1:12:20
  Speaker 1: government subsidies and it is just a waste of moth.
• 1:12:22
  Speaker 1: They came about on their own. Beginning, there was a
• 1:12:25
  Speaker 1: huge movement to the private sector can do this on
• 1:12:28
  Speaker 1: their own. And once they figured out they could suckle
• 1:12:31
  Speaker 1: off the teat of Uncle Sam, they were all over
• 1:12:34
  Speaker 1: and there. Sure, and you know it's an entrepreneur Okay,
• 1:12:37
  Speaker 1: why not? You know, you know, because we know where
• 1:12:40
  Speaker 1: it helps making the money money, the old fashioned way,
• 1:12:43
  Speaker 1: skill luck, Clair biyance Brand's higher work, and so much
• 1:12:45
  Speaker 1: government subsidy you can't miss until they collapse under their
• 1:12:50
  Speaker 1: own way. So so you're really a pretty optimistic guy
• 1:12:53
  Speaker 1: about the future of America. I am, I am, I am.
• 1:12:56
  Speaker 1: I think we've got to get through this. This, this
• 1:12:58
  Speaker 1: the leveraging. How long does at last? Normally? You know,
• 1:13:01
  Speaker 1: if you look at the Ryano Rokoff data, it was
• 1:13:04
  Speaker 1: waiting for it goes ten years. Now they are that
• 1:13:08
  Speaker 1: data is over centuries. It's developed countries, it's banana republics.
• 1:13:13
  Speaker 1: There's a lot of apples and oranges recently, but right now,
• 1:13:18
  Speaker 1: right well recently, you know, if you go back to
• 1:13:20
  Speaker 1: the thirties, it was about ten years. We're eight years
• 1:13:23
  Speaker 1: into this now. At the rate we're going, it may
• 1:13:25
  Speaker 1: take longer than another two years to complete, but I'm
• 1:13:28
  Speaker 1: convinced that it will be twelve years, fifteen years maybe
• 1:13:32
  Speaker 1: something that if you use if you use a straight line,
• 1:13:34
  Speaker 1: the financial sector in this country has probably got another uh,
• 1:13:38
  Speaker 1: five or six years ago. The consumer working off xces
• 1:13:40
  Speaker 1: Stat's probably maybe a little bit longer, maybe seven eight years.
• 1:13:44
  Speaker 1: But that's just drawing straight lines. So you're guessing we're
• 1:13:47
  Speaker 1: halfway through. And as I mentioned earlier that one of
• 1:13:52
  Speaker 1: the really interesting questions is is our is the electric
• 1:13:56
  Speaker 1: going to have the patience to go through this, or
• 1:13:59
  Speaker 1: we're gonna get a react action. We're gonna get some
• 1:14:01
  Speaker 1: oddball uh in oddballs in Congress and administration. Are we
• 1:14:05
  Speaker 1: going to see a big push for goverment stimulus? And
• 1:14:09
  Speaker 1: if we do, I think it will be fiscal. It
• 1:14:10
  Speaker 1: won't be monetary, because you know we've already I think
• 1:14:13
  Speaker 1: we've exhausted the monetary Yeah. Well that's the traditional listen.
• 1:14:18
  Speaker 1: Following the Great Depression, even following the two thousand recession,
• 1:14:22
  Speaker 1: we saw a huge surge of fiscal stimulus that's been
• 1:14:25
  Speaker 1: more or less missing this go around. What what would
• 1:14:29
  Speaker 1: the impact of that be to the de leveraging process.
• 1:14:32
  Speaker 1: Well it uh, I don't know that would necessary, it
• 1:14:35
  Speaker 1: would necessarily reverse it. I mean, but it it could
• 1:14:38
  Speaker 1: mitigate it. It could speed it up a little bit,
• 1:14:41
  Speaker 1: speed it up a little bit. Yeah, and could speed
• 1:14:43
  Speaker 1: it up. I just want my roads paved. You know.
• 1:14:46
  Speaker 1: People accused me of being uh, well, well you're a
• 1:14:49
  Speaker 1: big guy. No, No, I'm tired of replacing axles I
• 1:14:52
  Speaker 1: want you know my run flat tires show up as
• 1:14:54
  Speaker 1: flat because there were so many people know that. That's
• 1:14:57
  Speaker 1: That's a big difference between monetary and fiscal policy. Monetary
• 1:15:00
  Speaker 1: policy is a very blunt instrument. The Fed and other
• 1:15:03
  Speaker 1: central banks you can raise and lower interest rates, can
• 1:15:05
  Speaker 1: buy and sell securities. That's yet and beyond that, the
• 1:15:08
  Speaker 1: ship's fallwhard and you don't really see that immediately. Yeah,
• 1:15:11
  Speaker 1: the ships fall where they may. Fiscal policy can be pinpointed.
• 1:15:15
  Speaker 1: If you want to improve the roads, you put money
• 1:15:17
  Speaker 1: into road construction, if you want to help the unemployed,
• 1:15:20
  Speaker 1: increase unemployment benefits. It can be very very specific. It
• 1:15:23
  Speaker 1: doesn't say it's going to be efficient, doesn't say it's
• 1:15:25
  Speaker 1: going to be I'd like our electrical grid to be upgraded.
• 1:15:28
  Speaker 1: It's it's terrible. It'd be nice if our ports were secure.
• 1:15:32
  Speaker 1: We know that they're still vulnerable to foreign or terrorist attacks.
• 1:15:36
  Speaker 1: And I are on the same page here. I think
• 1:15:38
  Speaker 1: infrastructures is really and if you go if you travel
• 1:15:41
  Speaker 1: to Asia or Europe, our cellular system is awful, and
• 1:15:45
  Speaker 1: our broadband, where we essentially created this technology, we're now
• 1:15:50
  Speaker 1: the back of the but we are terrible compared forget Korea,
• 1:15:53
  Speaker 1: who kicks our but most of Europe is three to
• 1:15:56
  Speaker 1: five times faster than US and cheaper. Yeah, it's in credible.
• 1:16:00
  Speaker 1: Yeah alright, so I know I only have you for
• 1:16:02
  Speaker 1: a few more minutes. Let me go through some of
• 1:16:05
  Speaker 1: my favorite questions to ask people and we'll get you
• 1:16:08
  Speaker 1: out of here on time. Um. So, before before you
• 1:16:13
  Speaker 1: came to Wall Street, you mentioned you're working for Standard Oil.
• 1:16:17
  Speaker 1: What what did you do for them? What was your
• 1:16:19
  Speaker 1: pre Wall Street experience? I was an economists there. They
• 1:16:23
  Speaker 1: had what was called a general economics department. They had
• 1:16:26
  Speaker 1: uh economists that covered various segments of the world. I
• 1:16:28
  Speaker 1: was in charge of the US and Canada in terms
• 1:16:31
  Speaker 1: of forecasting and analysis of the economy. And that was
• 1:16:35
  Speaker 1: a time when the major corporations they had two things
• 1:16:41
  Speaker 1: they knew they had to have. You couldn't go to
• 1:16:43
  Speaker 1: lunch with your fellow CEOs and other wizards without having them.
• 1:16:47
  Speaker 1: But they didn't know what to do with either one.
• 1:16:49
  Speaker 1: And one was econ economists and the other was computers.
• 1:16:53
  Speaker 1: That's fascinating. So from that you decided from that and
• 1:16:57
  Speaker 1: from that I decided, Uh, you know, in Standard Oil
• 1:16:59
  Speaker 1: was it is a huge company obviously well run company.
• 1:17:03
  Speaker 1: It's going to be there forever, but it was fairly bureaucratic,
• 1:17:06
  Speaker 1: and I wanted to imagine a little more active, and
• 1:17:09
  Speaker 1: that's why I went left for Wall Street. So, so
• 1:17:12
  Speaker 1: let's talk a little bit about some of your early
• 1:17:14
  Speaker 1: mentors who really influenced your You mentioned the professor at
• 1:17:18
  Speaker 1: Amherst who impacted your your career clearly mentor who else
• 1:17:22
  Speaker 1: was a mentor of yours? Um, who influenced your thinking?
• 1:17:29
  Speaker 1: I'm not sure I could name I. You know, I
• 1:17:31
  Speaker 1: thought about that earlier. We talked about that, and I'm
• 1:17:34
  Speaker 1: not sure I could I could mention. I mean, I
• 1:17:36
  Speaker 1: I never, for better or worse, very I don't think
• 1:17:40
  Speaker 1: I ever had had the mentor. So let me ask,
• 1:17:44
  Speaker 1: let me rephrase that question slightly differently. What books throughout
• 1:17:48
  Speaker 1: your lifetime have you found especially influential? Um. I guess
• 1:17:57
  Speaker 1: some of the some of the basic books on the
• 1:17:59
  Speaker 1: economy and and uh um. But I think it's been
• 1:18:03
  Speaker 1: more the philosophical aspects and some of the some of
• 1:18:09
  Speaker 1: the some of the great thinkers who give us some examples.
• 1:18:13
  Speaker 1: You mentioned Milton Freedman or earlier. Yeah, certainly, I know
• 1:18:16
  Speaker 1: you don't agree with everything. He said. You know, Kane's
• 1:18:18
  Speaker 1: had a lot of interesting things. Um. My two thesis
• 1:18:24
  Speaker 1: advisers of Sanford ed Shawn Jack and Jack Early. They
• 1:18:28
  Speaker 1: came up to the idea that money pervaded in finance
• 1:18:32
  Speaker 1: and everything had a degree of money, even insurance policies. Uh.
• 1:18:37
  Speaker 1: But um, I can't say that I really studied under
• 1:18:40
  Speaker 1: you know, one great mentor and U or another. So
• 1:18:45
  Speaker 1: so let's talk about the financial industry. Obviously a lot
• 1:18:52
  Speaker 1: has changed since you first joined Wall Street back in
• 1:18:55
  Speaker 1: the late sixties. What do you think is the most
• 1:18:57
  Speaker 1: significant shift we've seen you finance over the past forty years. Uh,
• 1:19:06
  Speaker 1: it's probably the poriferation of financial instruments. When I when
• 1:19:12
  Speaker 1: I got in, uh to Mary Lynch, and that was
• 1:19:15
  Speaker 1: in nineteen sixty seven, you had fixed commission rates. Um,
• 1:19:19
  Speaker 1: everything was pretty well regimented. No competition, no, yeah, no
• 1:19:24
  Speaker 1: real competitions we know today regulation. I mean they even
• 1:19:28
  Speaker 1: had resale holes, uh, fixed retail prices. You couldn't go
• 1:19:32
  Speaker 1: into the store and buy you know, couldn't buy to
• 1:19:35
  Speaker 1: a toothpaste where the price wasn't fixed in many cases. Uh.
• 1:19:39
  Speaker 1: But I think what's happened is first First, first of all,
• 1:19:44
  Speaker 1: you have opened things up with allowing competition starting with
• 1:19:48
  Speaker 1: may Day and a fixed commission race in nine, and
• 1:19:52
  Speaker 1: then also the proliferation of computers and an ability to
• 1:19:57
  Speaker 1: trade and moving away from individuals curities. I remember Mary
• 1:20:01
  Speaker 1: lynch Uh their trading operation that was looked like a
• 1:20:04
  Speaker 1: race track where they had these belts that went around
• 1:20:06
  Speaker 1: in a in a big view and a guy would
• 1:20:09
  Speaker 1: take an order and stick it in um in this
• 1:20:12
  Speaker 1: track and would go around with the guy on the
• 1:20:13
  Speaker 1: other side. It would process, and I mean, you know
• 1:20:16
  Speaker 1: it's it now. You push a button and it yeah,
• 1:20:18
  Speaker 1: I mean, you know, music and well, and not only that,
• 1:20:20
  Speaker 1: we're at the point now where these guys want to be.
• 1:20:23
  Speaker 1: It's so fast that they want to be a short
• 1:20:26
  Speaker 1: a distance physically from that hundred and eighty six thousand
• 1:20:32
  Speaker 1: miles a second, okay, but they want to be half
• 1:20:35
  Speaker 1: them closer. Don't travel that fast. But you know, I
• 1:20:39
  Speaker 1: mean that that kind of thing has has really and
• 1:20:42
  Speaker 1: if you remember the beginning of The Big Short if
• 1:20:45
  Speaker 1: you met that book by Michael Lewis, they talked about
• 1:20:47
  Speaker 1: all of these high frequency trading op brokerage firms that
• 1:20:52
  Speaker 1: locate just outside of the Holland tunnel, so they're the
• 1:20:55
  Speaker 1: closest to the feed from from all streets. And then
• 1:21:00
  Speaker 1: these guys from Chicago laying a fiber optic cable in
• 1:21:03
  Speaker 1: a dead straight line, didn't care what was in the way, mountains, houses,
• 1:21:08
  Speaker 1: just buy it and blow through it. And now they're
• 1:21:10
  Speaker 1: replacing that with you know, over the air microwave point
• 1:21:14
  Speaker 1: to point broadcast, so you don't even have to lay
• 1:21:16
  Speaker 1: fiber optic. You can just go. You have to have
• 1:21:19
  Speaker 1: a series of jumps because the curvature of the earth
• 1:21:21
  Speaker 1: gets in the way. But that's how important speed was
• 1:21:24
  Speaker 1: to those guys. And and and the question is are
• 1:21:27
  Speaker 1: we able to handle this uh in terms of the
• 1:21:31
  Speaker 1: effects of this. And we've seen this with you know
• 1:21:34
  Speaker 1: fair uh seven uh stock market nose dive one one day.
• 1:21:41
  Speaker 1: We've seen him with flash crashes into bonds, and more
• 1:21:45
  Speaker 1: recently we saw that with the E T F crush
• 1:21:48
  Speaker 1: And and yeah, and and the question is are we
• 1:21:51
  Speaker 1: are we really up to speed with with this? And
• 1:21:54
  Speaker 1: and then you have a much better question. And this
• 1:21:56
  Speaker 1: goes back to a lot of what we talked about
• 1:21:58
  Speaker 1: about automation and so on. Has that made us any
• 1:22:01
  Speaker 1: better decision makers? I'll tell you one one one one
• 1:22:06
  Speaker 1: uh one book that I always read. It's a whole
• 1:22:09
  Speaker 1: bunch of them. It's it's Shakespeare. I'm a great fan
• 1:22:11
  Speaker 1: of Shakespeare. And you go back and you say, you know,
• 1:22:13
  Speaker 1: first of all, that guy said things in an elegant
• 1:22:15
  Speaker 1: way that none of you know, every the best line
• 1:22:18
  Speaker 1: I've ever written is going to be big, is worse
• 1:22:21
  Speaker 1: than the worst line he ever wrote. But you look
• 1:22:24
  Speaker 1: at these and you say, has anything really changed? How
• 1:22:26
  Speaker 1: are we making any better decisions with all this technology
• 1:22:30
  Speaker 1: and speed? I'm not sure we have? And is this
• 1:22:33
  Speaker 1: this mean that it's given us more confidence that we're
• 1:22:36
  Speaker 1: you know, we're going bad and with more confidence than before.
• 1:22:41
  Speaker 1: I mean because you think, well, all that data is
• 1:22:43
  Speaker 1: available and so on, So I'm not sure that that
• 1:22:46
  Speaker 1: we're able to synthesize that data any better. And and
• 1:22:49
  Speaker 1: of course everybody else has the same data. And are
• 1:22:51
  Speaker 1: you any better off really in terms of for you know,
• 1:22:54
  Speaker 1: you're a forecaster, I'm a forecaster. Are we making better forecasting?
• 1:22:57
  Speaker 1: We did twenty years ago? But it's feels to me
• 1:23:00
  Speaker 1: that all this technology and all this high speed um
• 1:23:04
  Speaker 1: not specialists, not people who have an obligation to make
• 1:23:07
  Speaker 1: an orderly market. It makes it feel like the market
• 1:23:11
  Speaker 1: structure is a little less stable or a lot less
• 1:23:13
  Speaker 1: states Well, I think that I think that's true. And
• 1:23:15
  Speaker 1: and and you really say, is that is that simply part?
• 1:23:20
  Speaker 1: Is that part of the you know, does that go
• 1:23:22
  Speaker 1: with the territory? And you just have to expect these
• 1:23:25
  Speaker 1: periodic uh glicies and and and and uh, you know
• 1:23:30
  Speaker 1: the puke point you reach me occasionally is it is
• 1:23:33
  Speaker 1: this this part of the whole deal? And you you
• 1:23:35
  Speaker 1: live with it? And I say, that's that's part of
• 1:23:37
  Speaker 1: the deal. But but you know the thing about finances, finance, fundamentally,
• 1:23:43
  Speaker 1: the justification for finance is a grease the wheels of commerce.
• 1:23:47
  Speaker 1: It's it's if we had a barter system would be
• 1:23:50
  Speaker 1: pretty if it would be pretty rough? Uh too much
• 1:23:54
  Speaker 1: what finances? But I think finance, and particularly leading up
• 1:23:57
  Speaker 1: to the collapse of nine in two thousand a, a
• 1:24:01
  Speaker 1: lot of those guys felt they were an end of
• 1:24:02
  Speaker 1: themselves and they're only their only job was to make money,
• 1:24:06
  Speaker 1: and they didn't really think about are we contributing anything?
• 1:24:09
  Speaker 1: Are we improving productivity? Are we are we making it
• 1:24:13
  Speaker 1: possible for investments uh to get to get productive things?
• 1:24:18
  Speaker 1: Done in the economy, and I think there's I think
• 1:24:21
  Speaker 1: there's a lot of site and loss of of what
• 1:24:24
  Speaker 1: the ultment game, ultiment objective of finances. I couldn't I
• 1:24:29
  Speaker 1: couldn't agree more so that's historically looking back. Let me
• 1:24:32
  Speaker 1: ask you, UM, next question, what do you see as
• 1:24:36
  Speaker 1: the next important shifts in finance going forward? UM? Oh, gosh,
• 1:24:45
  Speaker 1: it's probably gone to do with globalization. UM. So no
• 1:24:49
  Speaker 1: more less of an impact of national borders than you have. Yeah,
• 1:24:53
  Speaker 1: I mean, you know, you mean that the technology is there,
• 1:24:56
  Speaker 1: and yet you do have you still have, you know,
• 1:24:59
  Speaker 1: separate right regulations, separate exchanges. Um. There's there's a lot
• 1:25:04
  Speaker 1: of of particularly in Europe, where they're trying to combine
• 1:25:08
  Speaker 1: this but on a on a global basis. But you know,
• 1:25:11
  Speaker 1: when when money can move around, move around at the
• 1:25:15
  Speaker 1: touch of a touch of a key stroke. Um. The
• 1:25:18
  Speaker 1: idea that you're moving into different regulatory jurisdictions because guys
• 1:25:23
  Speaker 1: are always going to try to game system, they're going
• 1:25:25
  Speaker 1: to look for the lowest regulatory climate. And I think
• 1:25:28
  Speaker 1: that's probably something that's we're going to see is a
• 1:25:30
  Speaker 1: lot more global control of of financial flows, not not
• 1:25:35
  Speaker 1: control in the sense of big brother, but just common
• 1:25:38
  Speaker 1: regulations so that it's it's all under the same all
• 1:25:42
  Speaker 1: under the same regulatory framework. So so down to my
• 1:25:46
  Speaker 1: last two favorite questions. And and let me ask you this.
• 1:25:50
  Speaker 1: So the millennials, the people are just graduating college who
• 1:25:54
  Speaker 1: we were discussing earlier. If one of them approached you
• 1:25:57
  Speaker 1: and said, Gary, I'm interested in the career finance, what
• 1:26:00
  Speaker 1: advice can you give me? What would you tell them? Uh?
• 1:26:06
  Speaker 1: Other than other than to become a great economist, of course, Uh,
• 1:26:11
  Speaker 1: I would. I would probably advise them to try to
• 1:26:15
  Speaker 1: find an area where you are doing something is productive
• 1:26:19
  Speaker 1: and you're not just glorified shuffer of paper. Uh. Trading.
• 1:26:26
  Speaker 1: Trading is important. It lubricas the system. But but trading
• 1:26:30
  Speaker 1: just for the sake of making money. I mean, you
• 1:26:32
  Speaker 1: look at you look at corporate finance. Um, if you
• 1:26:35
  Speaker 1: go back, you know, take Goldman Sacks that used to
• 1:26:38
  Speaker 1: be an investment banking house and and their job was
• 1:26:42
  Speaker 1: to their job was to work with clients and to
• 1:26:47
  Speaker 1: raise money for them to do investments and productive things.
• 1:26:52
  Speaker 1: And it was a win win situation. Uh. The client
• 1:26:55
  Speaker 1: got the got the issue place, investors were satisfied with
• 1:27:01
  Speaker 1: it most of the time. And and uh, the investment
• 1:27:04
  Speaker 1: banker got a fee. Okay, now what Wall Street has
• 1:27:08
  Speaker 1: evolved in his trading houses, and that isn't a win
• 1:27:11
  Speaker 1: win situation. It's a zero sum game. There's a winner
• 1:27:14
  Speaker 1: and a loser. Whether it's not like every it's not
• 1:27:16
  Speaker 1: like the pie is getting bigger. I don't think if
• 1:27:19
  Speaker 1: I were advising somebody, I'd say, I don't think you
• 1:27:22
  Speaker 1: ought to be in that, uh, in that zero sum
• 1:27:25
  Speaker 1: game business, because I somehow well, I don't think it's uh,
• 1:27:29
  Speaker 1: you know what, whether whether it just makes a lot
• 1:27:31
  Speaker 1: of money for you and you and you moved to
• 1:27:33
  Speaker 1: the Hamptons and so on, but it's not fulfilling and
• 1:27:36
  Speaker 1: it's not but I'm not sure. I'm not sure how
• 1:27:39
  Speaker 1: sustainable that is. And then my final question, what is
• 1:27:44
  Speaker 1: it that you know about investing and finance and economics
• 1:27:48
  Speaker 1: today that you wish you knew when you began way
• 1:27:51
  Speaker 1: back in the nineties sixties. Mhm Uh. It's probably a
• 1:27:59
  Speaker 1: lot more respect for the unknowns out there and the
• 1:28:05
  Speaker 1: vicissitudes of nature, and the realization that the best laid
• 1:28:09
  Speaker 1: plans of mice and van gang Off the galat that
• 1:28:13
  Speaker 1: you can that you can have a great forecast and
• 1:28:17
  Speaker 1: all the fundamentals fall into place, and markets just simply
• 1:28:22
  Speaker 1: do not confirm it. And the way I put it
• 1:28:25
  Speaker 1: is marcuts can remain irrational a lot longer than we
• 1:28:28
  Speaker 1: can remain solvent. I've heard that somewhere. Well, Gary, thank
• 1:28:31
  Speaker 1: you so much. This has been a delight. Um. If
• 1:28:34
  Speaker 1: people want to find your your newsletter or your research,
• 1:28:37
  Speaker 1: how do they go about tracking you down while they
• 1:28:39
  Speaker 1: can track us down? It's our website Www. A Gary
• 1:28:44
  Speaker 1: Shilling dot com. And you now have a Twitter handle.
• 1:28:47
  Speaker 1: I noticed, Oh yes, of course, and it's and it's
• 1:28:50
  Speaker 1: the same same at A Gary Shilling. Fantastic. Well, thank
• 1:28:55
  Speaker 1: you for spending so much time with us today. You've
• 1:28:58
  Speaker 1: been listening to Masters in Business. If you enjoy this conversation,
• 1:29:02
  Speaker 1: look up an Inch or down an Inch on iTunes
• 1:29:05
  Speaker 1: and you'll see the other sixty or so podcast we've had.
• 1:29:09
  Speaker 1: Let me make sure to say thank you to my
• 1:29:10
  Speaker 1: head of research, Mike pat Nick and my producer Charlie Volmer.
• 1:29:15
  Speaker 1: Be sure and check out all the rest of our
• 1:29:18
  Speaker 1: other interviews. I'm Barry Ritults. You've been listening to Masters
• 1:29:22
  Speaker 1: in Business on Bloomberg Radio.